The Rise of Corporate Dominance and the Rise of Income Inequality (Part V)
22 August 2017 | Pago Pago, American Samoa
IX. CEOs are plundering their corporations by stock buybacks for their own great personal gain
A stock buyback increases earnings per share of a company's stock and that in turn increases the price of the stock. The CEO can then exercise his stock options, using all other insider information available to him, of course (how can he be separated from it or his options), and get much more for his options and much more in pay than he otherwise would. There is no check on this racket.
Buybacks are not isolated events. CEOs have become enamored with stock buybacks as a potent means of manipulating their companies’ stock prices and their gains. Over the past decade, net corporate stock issues (that’s new shares issued minus share repurchases, plus shares retired in merger-and-acquisition deals) have drained more than $4 trillion from all U.S. non-financial corporations.
The 459 companies in the S&P 500 that were publicly listed between 2006 and 2015 did $3.9 trillion in buybacks, equal to 54 percent of their net income. That’s on top of the $2.7 trillion that these companies distributed to shareholders as dividends, representing another 37 percent of net income.
Through stock buybacks of this magnitude, CEOs are effectively looting the corporations they run and lining their own pockets.
So first CEO's swipe labor's productivity gains to increase their compensation, much paid in stock, over time and then they use stock buybacks to increase the gain on their shares and thereby propel themselves into the top 0.1% of income recipients, creating a major income inequality problem nationally -- if they are lucky enough to become a CEO of a DOW 30, S&P 500. a big NASDAQ company or even a large Russell 2000 corporation.
We are talking about under a 1000 CEO's here of the nations biggest corporations, yet they are a considerable part of the 0.1%, along with big bankers and inventors/venture capitalists. Big bank owners do not have to pay a franchise fee to the federal government for the privilege of creating new money essentially cost free and then loaning it out at interest which sums are no longer controlled by federal usury laws. That is their racket.
(to be continued)