Comment to INET & William Lazonnick´s post on Buybacks
Briefly and telegraphically my comments on (1) William Lazonick´s Inet (2) post on Joe Biden buyback policy and comment when still Vice-President.
(Stock Buybacks) “Manipulate the market and leave Americans worse off”….too much to be said so easily. But those were the words of a politician (Joe Biden), not academic (empirically-based) words. The author says implicitly that buybacks should be not legitimate, when it is a key element of capital allocation.
The few evidence references in the article point to INET and the author´s Non-for-Profit org. The only “purpose” of buybacks, (so they say of Apple!) is increasing the stock price, (and they take as a given that Apple is not investing enough). Where is the evidence of such statement? Apple´s prospects do not seem to be precisely low…….
Other affirmation refers to secondary market stock buyers not injecting a penny in the company, …., so what? As a result of their investment, they are owners of shares of a company producing profits that are potencially to be granted to them. No condition exists that capital is only to be returned to primary market stock buyers, -a silly idea really-.
As for suggestions regarding that Apple should do what the theorist recommends (not excluding an ideological bias), it falls by itself, given the success of the company. Also all Apple directors are said to have done a bad advise job, (sounds arrogant, doesn´t it?).
Moreover, when CEOs decide to cut buybacks and increase investment, the author takes this as an ideological move, instead of considering it the results of a savvy capital allocation analysis. In fact the cases exposed show that buybacks stop when market opportunities appear, or (case of Pfizer) the strategy of buying profits (could have been other) fades out, thus making the company look for its own patents.
As for the overall present concept of financialization, its ideological base excludes my comments.
(1) https://www.ineteconomics.org/perspectives/blog/where-did-you-go-vice-president-joe
Basic topics on Corporate Governance 
Interesting article on the matter, as a commentary to a recently published book that precisely attacks the idea that short-termism exists and damages the economy:
https://corpgov.law.harvard.edu/2022/04/15/a-deconstruction-of-the-short-termism-thesis/
and
https://missingthetargetbook.com/?msclkid=6c45aebdc3b511eca603c2b139809472
LikeLike