Regulating stock buybacks: the $6.3 trillion question

The influence of share buybacks on ill-health and health inequity: an exploratory analysis using a socio-ecological determinants of health lens

“…Perhaps the most comprehensive policy reform would be for ‘open-market’ share repurchases to be prohibited, as was the case in many jurisdictions prior to the 1980s and 1990s, or at least strictly regulated [ 32 ]. In contrast to Friedman’s doctrine, the normative and theoretical foundations for implementing bans or restrictions on share buybacks link with the contention that the state has a legal and moral responsibility to mandate greater corporate social responsibility, not least because business corporations owe their ‘right to govern’ and most of their powers to generate profits to state concessions [ 114 , 120 , 121 ].…”

“…Importantly, this line of thinking supports the argument that company or corporate law can and should play a key role in pushing for largescale economic transformations towards sustainability [ 4 , 122 ]. While a complete ban on share buybacks might be politically unfeasible, some scholars and politicians (especially in the US) have instead advocated for strictly regulating the practice when a corporation meets certain conditions [ 32 , 123 ]. These conditions could include when a corporation reaches a certain size in terms of revenue or number of employees; when a corporation has received government assistance; when a corporation has recently cut jobs, compensates its executives above a certain threshold, or pays its workers below a certain threshold; and/or when a corporation externalises a substantial amount of costs onto society [ 32 , 123 – 125 ].…”

“…In turn, widening wealth and income inequalities are associated with a range of adverse health outcomes. Furthermore, share buybacks are associated with a lack of long-term investment, and, in some cases, the promotion of harmful profiteering practices, that have the potential to negatively impact on health through both general and sector-specific mechanisms [ 25 , 26 , 32 ]. These include by jeopardising the livelihoods of workers, and by impeding access to quality essential products and services.…”

“…Share buybacks, on the other hand, serve largely to increase share prices in the short term, thereby increasing the capital gains that can be realised by shareholders, as well as executive pay [ 25 , 28 ]. In recent decades, share buyback expenditure has been more volatile than dividend expenditure, with corporate executives often implementing or expanding their share buyback programs during periods of high profits in addition to, rather than instead of, dividend payments [ 32 ].…”

“…A range of previous studies have identified that share buybacks are an increasingly important driver of wealth and income inequalities [ 25 , 26 , 28 , 32 – 35 ]. As with dividends, share buybacks directly contribute to widening wealth and income inequalities because shareholders (including the ultimate owners of related assets under management) tend to be over-represented by the wealthiest groups in mostly high-income countries [ 26 , 28 , 36 – 38 ].…”