"What's Brewing? Banning Stock Buybacks"

Other than the headlines, I know nothing about Abdu El-Sayed. I stumbled on this video of him discussing stock buybacks1. He gives an excellent description of what stock buybacks are, how they work, and some of the consequences of this activity.

Two aspects of his story could do with some amplification.

First, there is the psychology of top management in the stock buyback world. They are faced with enormous conflicts of interest. Since a large portion of their annual compensation is in the form of stock options2 and outright stock grants based entirely on the quarterly and annual financial results of their corporation, their decision-making about the corporation is inevitably in the shadow of their personal enrichment. This reinforces the notion that the only purpose of a corporation is to enrich shareholders. This is the reigning Shareholder Value Theory.

Second, he doesn’t mention the true scale of stock buybacks. Here is a chart showing stock buyback volumes. Note that we are talking about TRILLIONS of dollars! And, just for context, US GDP is ~$30 trillion per year. We are talking about a huge diversion of corporate profits from reinvestment in the business to the enrichment of shareholders.

I’m glad to see that a candidate for Senate can speak so well on an almost invisible phenomenon that is driving much of the wealth inequality that plagues the bottom 90% of Americans.