Tell the SEC to Re-propose Stock Buyback Disclosure Rule
The practice of stock buybacks has grown dramatically in recent years; in the 2010s, companies spent a total of $6.3 trillion on stock buybacks in the open market -- equivalent to 4% of that decade’s U.S. GDP.
Because we lack sufficient disclosure of stock buybacks, it is far too easy for corporate executives and other company insiders to manipulate the timing and structure of these buyback programs in a way that serves to fatten their own compensation packages.
What’s more, the recent history of stock buyback programs is replete with examples -- such as Boeing, Abbott Labs, Norfolk Southern and Bed Bath & Beyond -- where share prices dropped and the American public suffered severe and sometimes fatal consequences when companies dumped a staggering amount of their profits into buybacks instead of productive investments like safety or equipment upgrades.
To crack down on incentives to engage in insider trading and market manipulation, last year the SEC finalized a new disclosure rule -- which includes a requirement for companies to disclose if certain executives traded stock immediately before or after a buyback announcement -- that would have helped investors and the public gain more transparency into this opaque practice.
But in December, the conservative Fifth Circuit Court of Appeals, which is well-known for virtually always agreeing with the business interests that appear before it, struck down the rule.
The short-sighted practice of wasting profits on stock buybacks is going to continue to be rife with opportunities for abuse that puts investors, consumers, and the public at risk until strong regulation is in place.
The SEC should not hold back. Tell the SEC to reissue the stock buybacks disclosure rule so investors can see who is manipulating the system for their own benefit by adding your name now.