8 OCTOBER 2019 THE ATLANTIC
RESPONSES & REVERBERATIONS- THE CONVERSATION
The Stock-Buyback Swindle
American corporations are spending trillions of dollars to repurchase
their own stock, Jerry Useem reported in August. The practice is enriching
CEOs—at the expense of everyone else.
I was an institutional investor
in the 1980s and ’90s. Share
repurchases were a fraud
then and they are a fraud now.
When companies take cash
away from good investment
opportunities, it is a sin. When
on their community— polluting
the environment, failing to
create jobs while demanding tax
breaks, and putting strains
on infrastructure.
Future economic historians
will look back on this period as
one when greed combined with
really bad financial engineer-
ing led to a decline in America’s
economic strength.
Nancy Langwiser-Kear
WELLESLEY, MASS.The way I was taught long ago
is that when there are no better
uses for a company’s excess
capital and the price of the
company’s stock is “under-
valued,” it’s okay to repurchase
company shares, especially
by a company in the mature
stage of its product life cycle.
Given the rise in stock prices,
it’s disturbing to see so much
stock-buyback activity.
Are opportunities for
re investing earnings in the
future development of a
company dwindling?
Rex O’Steen III
GREENVILLE, S.C.I worked for Equifax for five
years and left before the
data breach. One year, the
company “invested” more than
$500 million, which was roughly
one-fifth of its annual revenue,
in buybacks. When asked after
leaving about the data breach, I
always said that one-tenth of the
amount invested in buybacks—
about $50 million—would
have gone a long way to secure
consumer data.
Jean Nickerson
BRAMPTON, ONTARIOI got my M.B.A. in 1972, and
“shareholder value” was the
mantra back then. In no way
was it an invention of the
1980s. It’s tempting to blame
the emphasis on shareholder
value on Ronald Reagan or
modern corporate profit-driven
culture, but that’s a canard.
The phenomenon is really allthey use debt to finance share
repurchases, it is even worse.
American companies would
have a bright future if they put
money into innovation and
research and development,
invested in their workforceinstead of pushing real wages
down, and took responsibility
for how their business affects
the community. It’s unfortunate
that many companies would
not spend a dime to ameliorate
the negative impacts they have