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To fulfill MLK’s vision of jobs and freedom for Black Americans, Washington must rein in corporate greed
Letter to SEC: How Stock Buybacks Undermine Investment in Innovation for the Sake of Stock-Price Manipulation
A comment on the Securities and Exchange Commission’s proposed rule “Share Repurchase Disclosure Modernization”
Investing in Innovation: A Policy Framework for Attaining Sustainable Prosperity in the United States
Business firms are not alone in making investments in the productive capabilities required to generate innovative goods and services. Household units and government agencies also make investments in productive capabilities upon which business firms rely for their own investment activities.
President Biden’s first SOTU Address was a missed opportunity to say what he knows to be true: Stock buybacks manipulate the market and leave most Americans worse off
Featuring this expert
Lazonick discusses how we evolved from a society in which corporate interests were largely aligned with those of broader public purpose into a state where crony capitalism, accounting fraud, and corporate predation are predominant characteristics.
“What is the motivation for tax avoidance? To maximize profits and juice the stock price, of course. A research team led by William Lazonick at the University of Massachusetts reports in Harvard Business Review that from 2009 to 2019, S&P 500 companies spent over 90% of net income on buybacks and dividends, with the highest levels achieved after the 2017 tax cuts, in 2018 and 2019. Taking on corporate debt to finance share repurchases has become commonplace. Never mind that share buybacks deplete corporate treasuries of cash to weather setbacks and to fund productive investment in labor and R&D.”
“As William Lazonick and other analysts have pointed out, stock buybacks artificially inflate executive pay and drain capital that could be put to productive purpose. .[xxv] — Sarah Anderson, Counter Punch [xxv] William Lazonick, “Profits Without Prosperity,” Harvard Business Review, September 2014.”
“And what if there is a stock buyback during the period the share price is inflated? Does that harm shareholders because the company is spending money to repurchase its stock, or does it actually further benefit them by potentially raising earnings per share (EPS)?” … Citation: William Lazonick, The Financialization of the U.S. Corporation: What Has Been Lost and How It Can Be Regained, 36 Seattle U. L. Rev. 857, 859 (2013) (noting that trillions of dollars are spent on share buybacks and that “corporate executives who make these decisions are themselves prime beneficiaries of this focus on rising stock prices as a the measure of corporate performance”)