End Executive Pay Abuse
U.S. Securities and Exchange Commission
In 2018, U.S. corporations bought back a record $1 trillion shares of their own stock. While these stock buybacks may inflate short-term stock prices, they can also deprive companies of needed capital expenditures, research and development, and investment in their own employees.
CEOs may favor buybacks over reinvestment in their company for two reasons. First, stock buybacks may help executives artificially achieve their incentive pay targets. For example, repurchasing shares inflates executives’ Earnings Per Share (EPS) performance metrics without actually increasing earnings.
Second, executives frequently sell shares that they received in executive pay into their company’s stock buybacks. Not only are executives cashing out shares that were supposed to encourage long-termism, but they are using the company’s cash to provide a short-term boost to the stock price to do so.
The U.S. Securities and Exchange Commission (SEC) is supposed to protect investors from manipulation of stock prices. Add your name and tell the SEC to demand action to end the executive pay abuse of stock buybacks.
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To:
U.S. Securities and Exchange Commission
From:
[Your Name]
I demand that the U.S. Securities and Exchange Commission take action to end the executive pay abuse of stock buybacks. In 2018, corporate stock buybacks exceeded a record $1 trillion. Corporate CEOs may favor repurchasing shares of their own companies for self-interested reasons.
First, stock buybacks may help executives artificially achieve their incentive pay targets. For example, repurchasing shares inflates executives’ Earnings Per Share (EPS) performance metrics without actually increasing earnings. Companies should be required to disclose when buybacks boost executive pay.
Second, executives frequently sell their personal shares that they received in executive pay into their companies’ stock buybacks. The SEC should reform Rule 10b-18 to take away the “safe harbor” for corporate stock buybacks if executives are going to cash out their shares during share repurchases.
The executive pay abuse of stock buybacks can deprive companies of needed capital expenditures, research and development, and investment in their own employees. The self-interest of corporate executives should not prevail over the long-term interests of our economy as a whole.
For these reasons, I urge you to take action to end the executive pay abuse of stock buybacks.