Returning capital to shareholders is an important and legitimate goal of many corporations. Buybacks are often an effective way to distribute capital, but care must be taken to mitigate downfalls related to personal gain and enrichment, poor timing, and excess leverage. Buybacks have experienced a meteoric rise in popularity since the turn of the twenty-first century, overtaking dividends as the preferred means to return capital to shareholders in jurisdictions like the US. In 2019 alone, corporations spent more than USD1.2 trillion globally on buybacks.

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But the rise of buybacks has been riddled with controversy. Academics, practitioners, and politicians alike have maligned the use of buybacks, taking issue with their potential contribution to income inequality, underinvestment in innovation, and use for personal enrichment. Buybacks and their implications for the long-term strength of the economy are controversial but not well understood. A deeper look at the topic reveals the following:

The Dangers of Buybacks: Mitigating Common Pitfalls, provides a fuller explanation of these findings, beginning with an examination of buybacks and their attraction, followed by a deeper look at their pitfalls, and concluding with practical tools and guidelines for companies, investors, and policymakers to evaluate buybacks on their long-term merits.

Investor-Corporate Engagement | Toolkit

Buybacks Playbook

6 October 2020 - In the right circumstances, buybacks can further long-term goals; new tools and guidelines could help evaluate buybacks on their long-term merits.

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Strategy | Article

Buybacks and Negative Equity – A Recipe for Disaster?

25 September 2020 - By Allen He However, the acceptance of buybacks has not been unanimous. Academics, practitioners, and politicians have criticized their use, taking issue with their potential contribution to income inequality, underinvestment in innovation, and use by executives...

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