Trump SEC appointee: Share buybacks benefit executives, not long-term investors
A Trump-appointed member of the Securities and Exchange Commission is railing against share buybacks, claiming that the increasingly controversial but common practice benefits corporate executives over long-term investors.
In a letter on Wednesday to Sen. Chris Van Hollen, D-Md., Commissioner Robert Jackson argued that more executives sell stocks after buybacks are announced than on regular trading days.
“When executives unload significant amounts of stock upon announcing a buyback, they often benefit from short-term price pops at the expense of long-term investors,” he wrote.
Scrutiny of the practice has intensified after corporations used some savings from the GOP-led tax law – which lowered the corporate rate down to 21 percent -- to buy back stock. Democrats highlight the phenomenon as evidence that the benefits of the measure went to the ultra-wealthy instead of middle-class and low-income Americans.
Senate Minority Leader Chuck Schumer, D-NY, and Sen. Bernie Sanders, an independent that caucuses with Democrats and is running for the party’s presidential nominee in 2020, previously introduced legislation that would require firms to raise minimum wage and provide health care coverage, among other things, before initiating a share repurchasing program.
Sen. Marco Rubio, R-Fla. Is also working on legislation on the issue to end the tax benefit given to buybacks.
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Jackson – a Democrat who was nominated by Trump in 2017 – was an early critic of companies repurchasing their own stock, arguing last year that those that engage in the practice are not investing properly in the workforce or new products.
In the letter, Jackson called for the SEC to reexamine its rules around share buybacks.
“Our securities laws should encourage executives to pursue the kind of sustainable value that creates the stable jobs American families count on,” he wrote.