The Destructive Power of Deregulation – Exhibit B - Share Buybacks

Up until 1982, share buybacks were ILLEGAL. They were, and
still are, a means to manipulate share prices and boost earnings per share
(EPS). Share prices and EPS are used regularly as the metric at which CEO’s
compensation structures are driven. When a CEO has a choice between investing
in a new business opportunity that might grow the company ten years down the
road or buying back company stock to boost EPS, they
elect to buy back shares and reap the enormous compensation packages. This
market manipulation is great for CEO’s and Wall Street shareholders, but in the
long run it is bad for their company, it is bad for their employees and it is
bad for the overall economy. It is a very shallow and shortsighted way to
increase the wealth of select few elite members of society while offering no
benefits to the rest of us.
Since 2010, companies have bought back more than $2 trillion of their own stock.
That is $2 trillion that could have gone to R&D, new factories, new
employees, or new green technologies. Instead it was used to manipulate stock
prices. We are sacrificing our future economy to enrich a few individuals in
the short term.
This market manipulation serves no economic utility. It is time to make
stock buybacks illegal again or at a minimum heavily regulated.
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