Dear John,

Stock buybacks, where a company buys shares of its own stock back from investors at artificially boosted values, mostly benefit CEOs and the 1% of the population who own 50% of the nation’s stock.

In recent years, the practice of stock buybacks has increased enormously, as companies spent $6.3 trillion buying back their own stock in the 2010s. That’s 4% of the nation’s GDP for the decade. By using inside knowledge of when and how these buybacks are scheduled, corporate executives are able to game the timing and structure of these buybacks to unfairly enrich themselves and their shareholders

These stock buybacks come at a huge cost. Every dollar spent lining the pockets of CEOs and other ultra-rich investors means less investment in wages, working conditions, safety, or equipment upgrades to protect workers or the general public.

It’s not hard to see the impact of the greed and short-term thinking that drives these stock buybacks.

Consider the Boeing 737, with 215 hull loss accidents resulting in the deaths of 4,928 people over the last 25 years, according to the Aviation Safety Network. Boeing failed to follow through with a promised $7 billion safety redesign at the same time that it was spending roughly that much each year on stock buybacks.

Under pressure from Wall Street, the Securities and Exchange Commission pulled an important new regulation requiring corporations to publicly disclose these stock buybacks. Now, the SEC needs to feel pressure from us to reinstate it.

Other companies have engaged in similar shenanigans prior to disasters resulting from inattention to more important priorities.

Norfolk Southern paid investors $18 billion in buybacks and dividends over the 5 year period before equipment malfunctions led to the disastrous derailment in East Palestine, Ohio, resulting in the release of over 300,000 gallons of toxic and flammable chemicals into the air and soil.

Abbott Labs engaged in $5 billion worth of stock buybacks while allowing plant conditions to deteriorate to the point that bacterial contamination of baby formula resulted in infant deaths and a nationwide formula shortage.

Meanwhile, Bed Bath and Beyond went into debt to fund stock buybacks of nearly $12 billion that ultimately bankrupted the company.

That’s why the SEC created a new disclosure regulation to require companies disclose when executives used insider knowledge to trade stock immediately before or after announcing a stock buyback plan. This would have increased public scrutiny and corporate accountability, but the notoriously corporate-friendly Fifth Circuit Court of Appeals struck down the rule before it could be implemented.

Instead of tweaking the regulation to make it compliant with the ruling, the SEC just shelved it. That’s not good enough.

Tell the SEC: Reissue the stock buybacks disclosure rule now.

Thank you for keeping “eyes on” profligate stock buyback programs that benefit only wealthy shareholders and CEOs, while putting workers and the public at risk.

Robert Reich
Inequality Media Civic Action