Indulge me, please, as I revisit the topic of stock buybacks. It might seem more appropriate for a publication like The Wall Street Journal, but when you look beneath the surface you’ll see that it’s a moral issue.


Buybacks, a common practice among big corporations, are great if you’re on a company’s board, in the executive suite or a major stockholder. But they are an upraised middle finger to the people whose labor creates the profits that make buybacks possible. 


An article posted last week on a website called The Hartmann Report reminded me of the inequity of stock buybacks. (I regularly check in at to read posts by progressive political commentator Thom Hartmann.) One of his posts last week, entitled The “Share Buyback” Rape of American Business, points out many ways that buybacks divert profits away from what’s good for the many — better pay and benefits for workers and more spending for innovations to ensure the company’s longevity. Instead, buybacks benefit the few — those at the top of the corporate heap who were already wealthy without buybacks. 


My interest in buybacks is rooted in the issue of income inequality. Share buybacks by large corporations are one tool among several that maintain or grow income inequality in this country. Is this result of share repurchases unintentional? How could it be? No board member could fail to realize that the fortunes spent on propping up the stock price could also be used for employee compensation and/or benefits.  One doesn’t need to be a socialist to recognize the excesses that this practice perpetuates. 


Every stock buyback reduces the number of shares on the open market. This automatically increases the earnings per share but does nothing to increase the value of the company as a whole. However, it does elevate the stock price which is tied, more or less, to earnings per share. This benefits the shareholder. Which shareholders does it benefit the most? The ones with the most shares: top executives who are compensated in stock options or outright grants of shares and holders of large blocks of shares. Now, an illustration from real life.


Walmart is the world’s biggest retailer and this country’s largest employer. The company typically repurchases about $10 billion of its shares per year. Trump’s 2017 tax cut provided all the cash Walmart needed to bolster its repurchase program for years to come. Again, who benefits the most? Members of the Walton family, who already own 50 percent of the company’s shares, control 3 seats on the board, and are the richest family in the country and maybe the world. Who gets nothing out of the share repurchase? You guessed it: the working mother stocking shelves on the night shift at your local Walmart.  


A study done by The Roosevelt Institute in 2018 explained another way Walmart could have used the $10 billion that year:


“If Walmart redirected $10 billion out of what is authorized for stock buybacks in 2018 to employee compensation for hourly workers instead, 1 million hourly Walmart employees would see an hourly wage increase of $5.66. This would bring the starting wage for a Walmart worker, currently set at $11 an hour, to $16.66 an hour. For a worker currently earning the starting wage and working Walmart’s full-time workweek of 34 hours per week, this increase in their hourly rate would mean an annual salary increase from $19,448 to $29,455. The additional income of $10,000 per year would have a major impact on working families nationwide.” 


The same study found that:


  • McDonald’s could pay all of its 1.9 million workers almost $4,000 more a year if it redirected the money it spends on buybacks to workers’ paychecks. 
  • If Starbucks reallocated money from buybacks to employee compensation, every worker could get a $7,000 raise.
  • Lowe’s, CVS, and Home Depot could give each of their workers raises of at least $18,000 a year. 


Despite some recent self-serving talk about “stakeholders” other than shareholders being owed some care, the boardroom mantra of “maximizing shareholder value” still rules supreme in this country. I well remember being lectured on this commandment by various CEOs  and management consultants over the years. I also remember from personal experience a bygone era when boards of directors restrained excessive executive compensation. But evidence shows that such restraint has more or less disappeared in the past 15 to 20 years, and more so in the U.S than in other western countries. In the US in 2018, the average CEO earned 265 times as much as the average worker, while his/her German counterpart earned 136 times as much. In 2021, average CEO pay had risen to 324 times worker pay.


Average pay for CEOs of S&P 500 companies has risen by around $500,000 per year over the past 10 years, according to  Meanwhile, average pay for workers is up $1,303 over the same period, topping out at $58,260 in 2021.  Here are some well-known companies and the ratios of CEO pay to worker pay:


  • Amazon – 6474:1
  • McDonalds – 2251:1
  • Starbucks – 1579:1


Here’s the link to the article:


Stock buyback programs are a  primary cause — but not the sole cause — of these dismal statistics. There’s also a twisted view in many board rooms that workers, especially the least skilled and lowest paid, are a fungible “cost,” and one to be minimized. After all, minimizing costs is good business. 


Management’s efforts to hold costs down are limited, though, by minimum wage laws, competition for new employees, and union organizing. So companies regularly turn to other measures like  lobbying against increases in the minimum wage and union-busting activities to keep the cost of wage earners down.


Top executives are treated far differently. They’re viewed as “assets” to be retained and rewarded. This is understandable. Boards of directors regularly pay large fees to headhunting firms to be sure that they are paying their management team enough.This results in the ratcheting up of compensation and benefits at the very top of the managerial food chain. Boards of directors’ concern about paying wage-earning workers enough is less evident. Stock buybacks illustrate this difference in emphasis rather well. 


Not surprisingly, there’s precious little evidence that the average US citizen is concerned about the scandalous income inequality in this country. (Or, for that matter, that she/he considers it scandalous.) And, aside from Bernie Sanders, Elizabeth Warren, and AOC, there’s little evidence that our political elite want to do anything about it. Even with the labor shortages caused by the pandemic, there doesn’t seem to be a groundswell of activism among low-wage workers and their allies. Generally speaking, it seems that the status quo is holding. The average wage earner is barely getting by while the investor class and top management amass greater and greater wealth. And this is accepted as the best capitalism has to offer. 


Will there ever be enough outrage to force change in the way we practice capitalism in this country? My quixotic nature makes me want to believe that I’ll live to see it. I want to live to see corporations forced by public opinion to use their billions not to buy back their own stock to enrich the filthy rich but to use those funds to give average workers a living wage. Does that sound unreasonable? The rich will still be rich — I guarantee it. Somehow we need to rally widespread outrage and opposition to practices, like stock buybacks, that create and sustain inequality of income and wealth of which we should be ashamed..

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About Buck Close

Deacon Buck Close serves on the staff of the Church of St. John the Evangelist in Newport, RI. He was born in South Carolina, graduated from Tulane University in 1972 with a BA in Economics and Latin American Studies.

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