September 13, 2019

Stock Buybacks: Misused? Or Misunderstood?

Even though the multi-trillion dollar practice of public corporations repurchasing their shares has garnered academic and bi-partisan political criticism, imposing blanket restrictions on buybacks could have unintended consequences, because corporate finance questions and the role of buybacks in capital management for any individual company, are complex.

The program will consider that complexity in discussing various policy proposals being advanced to restrict or regulate stock buybacks.

Prof. Fried has written on how the idea that corporate expenditures replace expenditures for capital equipment and productive investment does not match to reality. He has also written critiques about the impact of buybacks on executive compensation practices.

Ken Bertsch, Executive Director of the Council of Institutional Investors, writes and speaks on the multiple, and occasionally conflicting, perspectives on buybacks held by institutional investors.

In “Dilution, Disclosure, Equity Compensation and Buybacks,” Mr. Dravis described how buybacks and equity compensation are complementary, but their connection is obscured by the asymmetrical timing, approval processes, and securities and financial disclosures for each. His article describes these differences, and quantifies the share-denominated and dollar-denominated effects of buyback and equity compensation transactions over a 10-year period for selected Fortune 100 companies.

Prof. Fairfax, in addition to serving as moderator for the panel, may speak to governance and corporate law issues relating to buybacks.