Stock Buybacks and the Wealth Gap

Most public observers note the wealth gap in the United States.  Liberal Democratic politicians for the past two years have suggested legislation to narrow it, and one theme is to prevent public corporations from buying back their own stock unless they have acted to close the wealth gap.

Bernie Sanders is re-introducing legislation that would ban buy-backs unless companies increase pay to a $15 minimum wage and provide paid sick-leave.  Similar controls would impact dividends.  The theory is that buy-backs enrich investors and executives, already wealthy enough.  A recent Times op-ed piece by Bernie and a California Rep was to the same effect.

Elizabeth Warren’s was more subtle, barring executive sale of shares for three years after a stock buy-back, although other provisions were more far-reaching (employees would name 40% of a public company board, a proposal so disruptive from a governance perspective as to be structurally unworkable even putting aside being a political non-starter.)

It is not my job here to engage in the ongoing un-civil political war we are now experiencing.  It does, however, strike me that the proposals of both Senators are very far from the mainstream of historical American social and political thought, as well as sure to create enormous resistance from business interests and business theorists.  To the extent one identifies and wishes to address wealth disparity, which indeed can be an existential risk to any government (at some point we cannot easily define for the US), a more limited practical approach in increments certainly seems more viable if you really want to see actionable legislation get passed and signed by someone living at 1600, Republican or Democrat.

Disclosure:  Bernie and I were classmates (class of ’59), and both writers for the James Madison High School Magazine, but at the time Bernie was writing about his track team and not about politics.  Same school attended by Chuck Schumer and Ruth Bader Ginsberg….


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