Jeff Gordon –
People claim to be worried about stock buybacks. In fact, the buybacks are a stand-in for what we can all see: business in this country works for wealthy shareholders, not workers, customers, or communities.
Buybacks are in the news as policymakers contemplate a bailout of several major U.S. airlines, all of which have relatively little cash on hand to weather the current crisis. One reason the airlines have so little cash is that, as Bloomberg reports, they spent 96% of free cash flow buying back shares over the last decade. Senator Elizabeth Warren has proposed that no corporation receiving a government bailout should ever again be allowed to conduct buybacks. But the notion that, with fewer buybacks, the airlines would have saved enough to withstand a world-historic economic collapse is fanciful. To see this, we must recognize that the massive stock buybacks of the past decade are a symptom of heightened shareholder power. Efforts to limit or ban buybacks without addressing that power at its source would not lead to the higher wages, productive investments, or rainy-day savings that buyback critics hope for. Moreover, the narrow focus on buybacks distracts from the bigger opportunity presented by the crisis: to reclaim corporations for the public good.