Companies Spend on Stock Buybacks

Tuesday, November 22, 2011

A trader signals an offer in the corn options pit at the CME Group March 15, 2011 in Chicago, Illinois. U.S. stock and commodity prices tumbled following a sharp drop in Japan’'s stock market. (Scott Olson/Getty Images/Getty)

Corporations all over America may be laying off employees, but many remain flush with cash. The New York Times reports in Tuesday's paper about an increasingly trend among American corporations. Instead of hiring more workers or investing in new growth opportunities, big companies are spending money on buying back their own stock. Louise Story, Wall Street and finance reporter for The New York Times, discusses why this is happening and what it means for the economy.

Comments [3]

carl, queens, n.y.

no company is going to expand when they can't sell what their already capable of producing.. only demand causes expandtion.. more jobs means more money in pockets, means more expantion.. to me, companies that buy back shares because they are loaded with cash, tells me they have limited business imaginations.. cash should be used to grow the company..

Nov. 22 2011 01:09 PM
Seth from NYC

Louise Story has inserted a bit too much opinion into the reporting on this. Blaming executive compensation packages for stock buybacks is absurd. The best executive compensation packages align the interests of executives with those of shareholders. There are times when it makes more sense for a company to buy back its shares than to make other investments. Who knows if this is one of those times? But, in this case, if stock prices rise as a result of a buyback, both executives and shareholders will benefit and perhaps reckless investments in the pursuit of growth in uncertain times has been avoided. Maybe "the economy" will suffer as a result but no company has ever asked an executive to consider the good of the economy over the good of the company and its shareholders. Nor should it.

Nov. 22 2011 10:05 AM
listener

The other unmentioned reasons for business to sit on their cash are crippling government regulations and thanks to the current administration, absolutely no certainty in knowing what additional interference business will be subjected to by the federal government in the next few years.
And what is the answer from the progressive media? More interference which will lead to more stagnation and more hand wringing and sputtering about why these mean businesses will not hire. How long before they start to rationalize the forcible confiscation of assets from private business for the benefit of the people?

This kind of foolish demagoguery against business and constant cheerleading for statism is exactly what led to a $15 trillion dollar debt and on the way to insolvency.
If a CEO ran his business like the President ran this nation, the business would have....well...a massive debt and on the road to insolvency.
Get it?

Nov. 22 2011 10:03 AM

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