(C) Common Dreams
This story was originally published by Common Dreams and is unaltered.
. . . . . . . . . .
Congress Takes Historic Step to Tax Stock Buybacks [1]
['Phil Mattera', 'Les Leopold', 'Azza Altiraifi', 'Sasha Hammad']
Date: 2023-11
Stock buybacks occur when a company purchases its own shares, resulting in fewer outstanding shares, which in turn results in higher earnings per share (EPS). This artificial boost in EPS benefits executives, who often receive compensation packages that are more than 80 percent stock awards and stock options.
Not only do executives benefit from the higher EPS the execution of stock buybacks results in, but they also benefit from the short-term bump in share price that results from a company’s announcement of buybacks. Indeed, research conducted by then SEC Commissioner Robert Jackson found that executives sold five times more shares in the eight days following a buyback announcement compared to the days before the announcement.
Meanwhile, every dollar spent on stock buybacks is a dollar not spent on raising worker wages, research and development, and other productivity-boosting investments. Studies have shown that stock buybacks are associated with wage stagnation and layoffs, investment slowdowns, and reduced innovation.
“I think they’re one of the most self-serving things that corporate America does,” Schumer continued. “Instead of investing in workers and in training and in research and in equipment, they simply — they don’t do a thing to make their company better and they artificially raise the stock price by just reducing the number of shares.”
Instead of workers being treated as important partners in ensuring the long-term well-being of companies and the economy as a whole, labor is treated as a cost to minimize so that shareholders and corporate executives can be rewarded in the short term.
The rampant use of buybacks at the height of the Covid-19 pandemic, even as many workers were losing their jobs and many others were being forced to work in unsafe conditions, is a perfect example of how buybacks unfairly prioritize short-term shareholder returns and the wealth of corporate executives over the safety and urgent needs of workers and their communities.
The Institute for Policy Studies revealed how companies that pay low wages also engaged in rampant stock buybacks, amplifying the CEO-worker pay gap. And at every step of the fight, unions, including the Communications Workers of America, have emphasized how stock buybacks hurt workers and society.
The racial disparity in stock ownership turns buybacks into an accelerator of the racial wealth gap. White households, as of the fourth quarter of 2021, owned almost 90 percent of corporate equity and mutual fund value, while Black households owned 1.1 percent and Latinx households owned 0.4 percent. Additionally, Lenore Palladino, a professor at UMass Amherst, meticulously documented how the proportion of the racial wealth gap attributable to corporate equity ownership has grown over time.
Excessive stock buybacks hurt consumers and our society as a whole. Abbott, a maker of baby formula, spent billions on stock buybacks while skimping on investments needed to keep their product safe and in production.
[END]
---
[1] Url:
https://inequality.org/research/congress-takes-historic-step-to-tax-stock-buybacks/
Published and (C) by Common Dreams
Content appears here under this condition or license: Creative Commons CC BY-NC-ND 3.0..
via Magical.Fish Gopher News Feeds:
gopher://magical.fish/1/feeds/news/commondreams/
