Working Paper Corporate Power

Regulating Stock Buybacks: The $6.3 Trillion Question

May 10, 2021

By Lenore Palladino, William Lazonick

Stock buybacks––a corporation’s repurchases of its own shares on the open market––manipulate stock prices and enrich senior corporate executives while preventing companies from investing profits in innovation. Rewriting the rules governing the practice of open-market share repurchases is a necessary step toward building back a more innovative and sustainable US economy.

In “Regulating Stock Buybacks: The $6.3 Trillion Question,” Lenore Palladino and William Lazonick document the adverse impacts that stock buybacks had on innovation in the past decade (including those highlighted by the COVID-19 pandemic), present common-sense reforms available to Congress and the Securities and Exchange Commission (SEC) to curb buybacks, and outline the potential benefits of these proposed regulations. The authors argue that limiting buybacks would help reduce corporations’ manipulation of market prices and encourage executives to fund innovation and invest in employees.

Tags: Corporate Governance

Roosevelt Author

Lenore Palladino

Senior Fellow

As a senior fellow at the Roosevelt Institute, Lenore works on public policies related to corporate governance, labor, capital markets, and financial technologies.