What the Main Criticisms of Stock Buybacks Get Wrong

Stock buybacks are making headlines again, with a new report from the Roosevelt Institute criticizing the practice. The report claims that stock buybacks are “plundering a company’s resources at the cost of a company’s long-term wellbeing.” The report argues that investments in capital, research and development (R&D), and worker training are displaced by stock buybacks. It also argues that buybacks are short-sighted, benefiting executives at the expense of the other employees. Analyzing these three arguments shows they are superficial, fail to account for key points, and lack supporting evidence. “The growth of stock buybacks coincides with lower levels of corporate reinvestment overall, as companies have reduced spending on developing new businesses, hiring workers, and establishing new operations.” The perception that the choice is between stock buybacks or investment is false. This idea is superficial; it fails to see how companies…

Read more detail on Recent Tax Law posts –

This entry was posted in Tax Law and tagged , , , , . Bookmark the permalink.

Leave a Reply