Must-Read: William Lazonick: Stock buybacks: From retain-and reinvest to downsize-and-distribute
Must-Read: Stock buybacks: From retain-and reinvest to downsize-and-distribute: “Stock buybacks are an important explanation for both the concentration of income…:
…among the richest households and the disappearance of middle-class employment opportunities in the United States over the past three decades. Over this period, corporate resource-allocation at many, if not most, major U.S. business corporations has transitioned from ‘retain-and-reinvest’ to ‘downsize-and-distribute,’ says William Lazonick in a new paper…. Lazonick also challenges many of the notions associated with maximizing shareholder value, an ideology that has come to dominate corporate America. Lazonick calls for a decrease, or even a ban, in stock buybacks so companies will be able to use these funds to finance capital expenditures but more importantly to attract, train, retain, and motivate its career employees. And some of the funds made available by a buyback ban can even flow to the government, he argues, as tax revenues for investments in infrastructure and human knowledge that can underpin the next generation of innovation.