Page 18 - The South China Business Journal
P. 18
C. TODAY
3 Things
You Need to Know About
Stock Buybacks
By U.S. Chamber of Commerce
Here are three things to know about stock buybacks, according to
a recent report from the U.S. Chamber’s Center for Capital Market
Stock buybacks are a well-established 2. Companies don’t choose stock buybacks
corporate strategy that, similar to dividends, over reinvesting in the company.
provide investors with a return on their
investment. In the broader economic cycle, this Businesses plan to engage in share repurchase
return allows investors to reallocate capital, plans when they have excess capital.
which then helps grow the economy and Commitments to workers and R&D are made in
create jobs. the company’s annual planning at the outset of the
year, while buybacks are paid from the resulting
Despite the economic benefits, some revenue; companies do not choose buybacks
policymakers have criticized the practice over wage increases or investing in additional
of stock buybacks. For instance, this past research and development. In fact, S&P 500 firms
September, Senators Brown (D-OH) and have increased their R&D spending and capital
Wyden (D-OR) introduced the Stock Buyback expenditures as a percentage of revenue over
Accountability Act with the intent to limit recent years. Additionally, following the passage of the
share repurchases. This bill could be included 2017 tax reform package, companies have increased
in the much debated Build Back Better hiring, given employees bonuses and raises, and
reconciliation package. increased or expanded benefits for employees.
With the potential for new legislative 3. Stock buybacks help the broader
developments, now is a good time to take a economy by delivering cash to companies
closer look at stock buybacks: what they are, that need capital.
what they do, what motivates a company to
make investment decisions, and who benefits 500 firms account for less than 50% of business
when companies buy back their stock. profits and less than 20% of employment. Capital
that flows to shareholders of these companies
Here are three things to know about stock buybacks, can be invested in innovative public and private
according to a recent report from the Chamber’s companies of all sizes that are starving for capital.
Center for Capital Market Competitiveness. And by the way, small businesses drive a great deal
of job growth in this country.
1. Stock buybacks benefit everyday
Americans and retirement account There are a lot of policy issues impacting the U.S.
holders, not just company executives. business community that deserve lawmakers’
immediate attention — like the bipartisan
Fifty percent of Americans are invested in the infrastructure package, immigration reform, and
stock market, and four in 10 dollars invested passing new trade agreements. Raising barriers
in the stock market are held in retirement to distributing earnings would only encourage
funds. Stock buybacks, like dividends, are a companies to hold on to excess balances that
common way to distribute earnings to these could otherwise be put to more productive use.
investors. Shareholders often reinvest gains Instead, allowing companies and investors to
from buybacks into growing new businesses efficiently deploy capital throughout the economy
and creating jobs, which means that proposals — without the heavy hand of one-size-fits-all
to restrict or discourage buybacks would government mandates — will lead to the best
ultimately be detrimental to American families outcomes for workers, American companies, and
and the U.S. economy. the U.S. economy.
15 AMCHAM SOUTH CHINA
3 Things
You Need to Know About
Stock Buybacks
By U.S. Chamber of Commerce
Here are three things to know about stock buybacks, according to
a recent report from the U.S. Chamber’s Center for Capital Market
Stock buybacks are a well-established 2. Companies don’t choose stock buybacks
corporate strategy that, similar to dividends, over reinvesting in the company.
provide investors with a return on their
investment. In the broader economic cycle, this Businesses plan to engage in share repurchase
return allows investors to reallocate capital, plans when they have excess capital.
which then helps grow the economy and Commitments to workers and R&D are made in
create jobs. the company’s annual planning at the outset of the
year, while buybacks are paid from the resulting
Despite the economic benefits, some revenue; companies do not choose buybacks
policymakers have criticized the practice over wage increases or investing in additional
of stock buybacks. For instance, this past research and development. In fact, S&P 500 firms
September, Senators Brown (D-OH) and have increased their R&D spending and capital
Wyden (D-OR) introduced the Stock Buyback expenditures as a percentage of revenue over
Accountability Act with the intent to limit recent years. Additionally, following the passage of the
share repurchases. This bill could be included 2017 tax reform package, companies have increased
in the much debated Build Back Better hiring, given employees bonuses and raises, and
reconciliation package. increased or expanded benefits for employees.
With the potential for new legislative 3. Stock buybacks help the broader
developments, now is a good time to take a economy by delivering cash to companies
closer look at stock buybacks: what they are, that need capital.
what they do, what motivates a company to
make investment decisions, and who benefits 500 firms account for less than 50% of business
when companies buy back their stock. profits and less than 20% of employment. Capital
that flows to shareholders of these companies
Here are three things to know about stock buybacks, can be invested in innovative public and private
according to a recent report from the Chamber’s companies of all sizes that are starving for capital.
Center for Capital Market Competitiveness. And by the way, small businesses drive a great deal
of job growth in this country.
1. Stock buybacks benefit everyday
Americans and retirement account There are a lot of policy issues impacting the U.S.
holders, not just company executives. business community that deserve lawmakers’
immediate attention — like the bipartisan
Fifty percent of Americans are invested in the infrastructure package, immigration reform, and
stock market, and four in 10 dollars invested passing new trade agreements. Raising barriers
in the stock market are held in retirement to distributing earnings would only encourage
funds. Stock buybacks, like dividends, are a companies to hold on to excess balances that
common way to distribute earnings to these could otherwise be put to more productive use.
investors. Shareholders often reinvest gains Instead, allowing companies and investors to
from buybacks into growing new businesses efficiently deploy capital throughout the economy
and creating jobs, which means that proposals — without the heavy hand of one-size-fits-all
to restrict or discourage buybacks would government mandates — will lead to the best
ultimately be detrimental to American families outcomes for workers, American companies, and
and the U.S. economy. the U.S. economy.
15 AMCHAM SOUTH CHINA
