While the leader of the Senate minority, Chuck Schumer (D-NY) and Senator Bernie Sanders (I-VT) protested against the buyback of their own shares by companies, stock repurchase activities by large companies have exceeded those of last year.
According to Bank of America Merrill Lynch (BAML), stock buybacks by companies "remained solid last week and since the beginning of the year continue to exceed last year's records." In particular, they reported that activity was up 78% from last year's levels.
Although we are still at the beginning of the year, it should be noted that 2018 was a record high with US companies investing more than $ 1 trillion in share buybacks.
According to the BAML report, the purchases made by the bank's client companies mainly concerned the finance and materials sectors, with the material remaining at record levels.
Buybacks have emerged since Schumer and Sanders introduced a bill this month to prevent corporate share redemptions, unless they give priority to employees, including a $ 15 minimum wage. , seven days of paid sick leave, as well as health and retirement benefits.
In an editorial released last week, the pair called the stock repurchase of $ 1 trillion in 2018 as "self-indulgent business practice".
According to them, the reason is that redemptions do not benefit most Americans because a small percentage of the population owns the majority of the shares. In addition, many executives receive stock-based compensation and would benefit from share repurchases. They also argue that redemptions limit a company's ability to invest in salaries, R & D, training and other benefits.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Former CEO of Goldman Sachs, Lloyd Blankfein taken to Twitter For the first time since he left his position at the bank, he responded to senators' criticism. "data-reactid =" 29 "> The former CEO of Goldman Sachs, Lloyd Blankfein taken to Twitter for the first time since leaving office at the bank to respond to criticism from senators.
– Lloyd Blankfein (@lloydblankfein) February 5, 2019
Lloyd Blankfein, the former CEO of Goldman Sachs, is right in saying that money redemptions "does not go away." This increases the wealth of billionaires like him. Instead of making the rich even richer, why not raise the wages of American workers. Is this a bad idea? https://t.co/FpIGQW9IZC
– Bernie Sanders (@SenSanders) February 5, 2019
A day later, Blankfein responded.
Stock repurchases have been controversial for a long time.
Warren Buffett wrote in Berkshire Hathaway's 2016 annual letter that buyout discussions have "often gained momentum". He explained that redemptions made sense for long-term shareholders only if "the shares are bought at a price lower than their intrinsic value".
"While the subject of buyouts has exploded, some people have almost labeled them non-Americans – calling them bodily harm that divert funds away from productive activities." That's simply not the case: corporations US investors and private companies Investors are now inundated with funds that seek to be used judiciously.I am not aware of any attractive project that would have died in recent years for lack of capital, "wrote Buffett 'time.
Buffett also wrote that there were two cases where redemptions should not take place. First, if the company needs capital to make long-term investments in its business and does not want to get into more debt. And secondly, if the company needs funds for an acquisition or other investment opportunity offering "a value well above that of the undervalued shares of the potential buyer".
In a recent memo, noted investor Howard Marks, founder of Oaktree Capital Management, said he was opposed to the idea that the government tells businesses how they should be managed.
"I absolutely do not write to defend stock repurchases or to criticize the representation of the workers on the councils." What I am opposed to, it is (a) l '. the idea that governments decide how to manage businesses and (b) the appropriation of the economic situation of companies for parties other than their owners. "
The story continues
The marks continued: "What would be the effects of handing over a share of the capital of a company to workers, or requiring it to be placed on the board of directors?" Clearly, this would be tantamount to telling shareholders: "What you thought you were owned by – the company – you do not really own that. Share repurchases are a way of returning capital to business owners. Why should each of them be accompanied by an equivalent amount for workers? The next step would be to say: "Whenever a company pays a dividend, it should distribute a This would be tantamount to say:" In terms of business capital, workers have half of it " The consequences? Ask yourself who would create a business in the future if it meant that workers would be entitled to half the earnings.
And so the debate continues.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Julia La Roche is a finance reporter at Yahoo Finance. To follow her Twitter."data-reactid =" 51 ">Julia La Roche is a finance reporter at Yahoo Finance. To follow her Twitter.