Comments on: Stock Buybacks: Who Benefits The Most?

By: RichardH

RichardH — Sat, 18 Sep 2010 16:14:38 +0000

Article hits the nail on the head by pointing out that stock buy-backs primarily benefit MANAGEMENT, not the sharaholders. I’m surprised it has never occured to any of the “brains” running our govt (both parties) that this is a bread * butter economic issue – stock buy backs are like burning money; wouldn’t that money be better spent either investing in jobs/ RD, paying down debt, or paying dividends that will recirculate real CASH (not paper profits) through the econom- as opposed to pumping up our rapidly devolving “casino” economy. Previous comment sites Exxon; Cummins Engine is another good example. A modest proposal to “restart” our economy: make it a cause of action by shareholders that, where any Board of Directors approves any compensation package to its executives based on stock price AT THE SAME TIME A STOCK BUYBACK PLAN IS IN EFFECT, both the approving board members and the receiving executives are personally liable to return to the shareholders all corporate funds expended both on the stock buyback AND any stock price based compensation. It seems obvious that there should be no CEO entitlement to stock price based compensation where the corp is artificially goosing up its stock price using profits that belong to the shareholders. Such a law would stop this eggregious practice in its tracks.

By: Kelly

Kelly — Mon, 28 Jun 2010 17:50:07 +0000

I agree, but its not just oil, America is for sale; it has been since I was a kid. Unfortunately the buyers are all outsiders, with outside interest. America is being raped, and placed back on the market by her own.
I tell you a truth in just a few short years China will own us and the Mexicans will run this country.
America as we know it, is gone, she died in the 70’s when we beginning to export our steal mills & factories over seas. Then in the 90’s they called it outsourcing our technology. You ever get placed on hold, when making a call to a bank or cell phone company; may goodness what country are our calls being routed too?

By: janes McGonigle

janes McGonigle — Thu, 10 Jun 2010 23:13:33 +0000

Why don’t you mention that a company must be profitable before it can “buy-back” it’s common stock?

By: jason

jason — Mon, 19 Apr 2010 11:57:08 +0000

Bill Berggren, what you’re saying, with all due respect, doesn’t make sense. If a compnay has cash flow to buy back 10% per year, it should never had gone out of business, unless it borrowed heavily to do the buy-backs.

It is my belief that, regardless of market sentiment, a TRULY well managed business should NEVER issue debt/borrow from the bank and issue dividends or buy-backs at the same time. You either need the money to expand, or you pay it out. You don’t borrow, at interest, to pay shareholders. That is just exec’s trying to bid up the share price to profit on their stock options.

By: Bruce

Bruce — Wed, 10 Feb 2010 01:19:00 +0000

Don’t forget that dividends are a taxable event for many investors. By buying back shares, the increase in share price becomes a capital gain (taxable at a lower rate if shares are held long enough) and the investor doesn’t have to pay it until they sell the shares.

Compared to a dividend, this is an advantage to the investor, because the dividend is always taxed as ordinary income in the year it was distributed.