We read at hbr.org, that “…the 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012… …those companies used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock.” The fact, that over 50% of the earnings so made by these S&P corporations, was thereupon spent to buy their own corporate public stock, as compared to utilizing a more significant amount of those earnings for other things such as dividends, research and development, investments, corporate debt relief, or for compensation for staff outside of the executive office, is a real tragedy to the American people, in whole.
The bottom line is that corporate buybacks primarily benefit directly those that own or have options for that public stock, because quite frankly, it is a form of stock manipulation, so done, as a real aid and distinct help to boost the stock price. After all, the more buyers’ money that a given stock attracts, the more that it has a tendency to rise. In truth, stock buybacks, have little or nothing to do with management believing that the investment of money so earned and subsequently used to buy the public stock is the best usage of that money, but rather it has everything to do with trying to “goose up” their own compensation packages.
Before 1982, stock buybacks were illegal, and were considered to be a form of stock manipulation, which was why they were illegal. We now have nearly forty years of stock buyback’s history, which demonstrates that stock buybacks are beneficial specifically for the richest of the rich, and therefore of little or no merit for the general public of America; of which, probably the biggest dividing line between why the superrich are currently accumulating more and more wealth at the expense of the general public is because of all the stock wealth being specifically funneled into their hands, at the expense especially, of the middle class.
When a corporation decides to go public by issuing stock to the general public, it thereupon has a responsibility to not only their shareholders, but also to the governance which permits their corporate existence -- by not just existing to make a profit, but rather to conduct their business which is becoming of what it means to be legally sanctioned by the United States of America to do so. Instead, too many of these corporations, are driven to a very large extent by greed as well as by gaming the system, so that those that are at the top can maximize their own income and wealth, under the illusion so sold, that all is fair and right; when in reality, a significant portion of the profits so being made is not being distributed fairly but is tilted heavily into the hands of those that are its corporate executives and biggest shareholders.
When such a high percentage of profits are being redirected into the hands of the executive officers, as opposed to more of that money being utilized for research and development, general improvement, or providing more equality and fairness in compensation for all of its employees; we have in front of us a system which is corrupt, and of which, the government has become its enabler, when rather that government should be looking out for those that deserve a fair deal, instead.