Stock Buybacks are Deadly. It’s Time to End Them.

By Porter McConnell and Luísa Abbott Galvão 

The eighties brought us permed bangs, acid wash jeans, and Gordon Gecko’s “greed is good” mantra. So it’s not surprising that in 1982, among other bad ideas, the Securities and Exchange Commission put into effect something called Rule 10b-18, which granted a “safe harbor” (read: free pass) to company executives who wanted to buy back their own stock to raise its price. The SEC promised it would no longer accuse executives who bought back their own stock of market manipulation, rewarding corporate greed.

What exactly is a stock buyback? Stock “buybacks” are when companies buy back their own stock from shareholders on the open market. When a share of stock is bought back, the company reduces the number of shares left in the market, which raises the price of remaining shares.

Company executives have every incentive to buy back stocks, since most of their compensation today is paid in the form of stock, and a higher stock price makes them personally richer. Executives push companies to buy back billions of dollars of their own stock, juice share prices, and pass on cash to themselves and wealthy shareholders. (If you’re curious about the mechanics, check out this short visualization of how it works, or Rep. Alexandria Ocasio-Cortez’s explainer at a recent House hearing.)

Over the last 15 years, 94 percent of corporate profits have gone to shareholders in the form of buybacks and dividends, instead of to workers and their families.

Stock buybacks benefit people who already have wealth, and those people are more likely to be White, and more likely to be male. Most Americans are not shareholders. Less than half of American households own stock, either directly or through a retirement account. But 94 percent of households in the top 1% own stock.

Even fewer Americans of color are included in the term shareholders. While 60 percent of white households have retirement accounts or hold direct equity in the stock market, only 34 percent of Black households, and 30 percent of Latinx households, have retirement accounts.

Posted In: Allied Approaches

Union Matters

Steel for Wind Power

From the USW

From tumbledown bridges to decrepit roads and failing water systems, crumbling infrastructure undermines America’s safety and prosperity. In coming weeks, Union Matters will delve into this neglect and the urgent need for a rebuilding campaign that creates jobs, fuels economic growth and revitalizes communities. 

Siemens Gamesa last month laid off 130 workers at its turbine blade manufacturing plant in Iowa, just months after GE Renewable Energy decided to close an Arkansas factory and eliminate 470 jobs.

The companies reported shrinking demand for their products, even though U.S. consumption of wind energy increases every year.

America’s prosperity depends not only on harnessing this crucial energy source but also ensuring that highly skilled U.S. workers build the components with the cleanest technology available.

Right now, the nation relies on imported steel and turbine components from foreign manufacturers like China while America’s own steel industry—well equipped for this production—struggles because of dumping and other unfair trade practices.

Steel makes up the bulk of turbine hubs and the wind towers themselves. It’s also used to make the cranes and platforms necessary for installing the towers.

Yet the potential boon to America’s steel industry is just one reason to ramp up domestic production of wind energy infrastructure.

American steel production ranks among the cleanest in the world, while China has the highest carbon emissions of any steelmaking nation and flouts environmental regulations.

The nation’s highly-skilled steelmaking workforce must play an essential role in the deeply-needed revitalization and modernization of the nation’s failing infrastructure. Producing the components for harnessing wind energy domestically and cleanly is an important step that will put Americans to work and position the United States to be world leaders in this growing industry.

 

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There is Dignity in All Work

There is Dignity in All Work