Fidelity’s managers, in general*, do not personally profit from taking a position in a particular stock. Corporate management does personally profit by buybacks, if their bonus is keyed to stock price.
*some years ago John Kaweske was the highly regarded manager of the Invesco Industrial Income Fund…until the company found that he was front running moves in the fund with his personal account, because he knew publicizing moves by the fund would move the stock. Invesco promptly fired him. Kaweske’s actions were unethical, but it’s perfectly fine for a CEO to announce a big stock buyback, as he is about to exercise a big block of options at a very favorable price.
If the consumer does not benefit from the corporation what is the point of the corporation? This is where capitalism has gone astray. Decades ago corporations did see themselves as being important to multiple stake holders, like their customers, their employees, their community, as well as their owners. Not anymore, and we are worse off for that.
Well, nobody is forcing them to consume from a particular company. If the company is not providing a good product/service (because of stock buybacks or some other reason) then the door is open for another company.
Wisdom is obtained over time. Those prior generations have less experience than we do - which is why things like slavery and male only land owners being able to vote are no longer a thing - we obtained more wisdom.
That doesn’t mean future generations can’t make mistakes (the last few years are full of such), but there is nothing inherently wise about prior generations. It is a fact that they have less experience than we do upon which to base decisions. Things being illegal in the past is no basis for declaring it wise. Again, history is full of things there were once illegal that are no longer such today - and for good reason.
To protect the owners. Seriously. That is the very nature of a corporation. It has nothing to do with the customers. Even when corporations did not exist, sole proprietorships, DBAs, and LLC still existed for the benefit of the owners, not the customers.
Such legal structures have NEVER been about the benefit of the customer. Trace the history of corporations to the “joint-stock” shipping companies of Italy in the 13th century and even then it was about the owners, not the customers.
That doesn’t mean, and I never stated, that customers are not important to for-profit corporations, just that they are not the most important thing, never have, and never will be. The REASON corporations exist (as a legal entity) are to benefit/protect the owners.
There are shades of grey that make that not SO true. The economic impact of corporations is about the public in many ways. Whether employment, investment, economies of scale or paying taxes into the general fund, corporations are a larger part of our economic power. As individuals there are unique rules and expectations. We can rework those rules and expectations and often have done just that. The sovereign power, the rest of us, is ultimate. The corporate power is wise to understand our needs. We can insist on that.
adding the legal structure of incorporating depends on the sovereign power of we the people.
I"m not talking about the legal structure of the corporation and whom that benefits. As I continued to say:
The CEO of CostCo famously quipped that his customers and his employees were the most important thing. Why? Because if those two parties were happy, then the share holders get taken care of as a consequence of that. He is right.
Of course it is. A mutual fund is making an arms’ length transaction, a stock buyback approved by management, stands to benefit management far more than shareholders, as they are 1) often highly paid with stock and 2) have inside information.
In fact buybacks were outlawed after the 1920’s precisely because they were seen - and used - to manipulate stock prices to the benefit of managers over shareholders (and the public.) Over time the arguments were made and the strictures loosened, but the dramatic escalation in them leads me to think that at least a re-evaluation of the practice is in order.
Assuming excess cash, a dividend benefits all shareholders - including management - equally. A buyback tends to goose the stock, especially at the announcement, which has the strong potential to incentivize self-interested behavior on the part of upper management which has knowledge of when the announcement will be made, and to what extent it will be carried out, and when.
Generally not. It is a shell game. The executives selling into those prices and the little guy holding on for higher as the retained earnings disappears.
but look at the balance sheet. The $4 billion is not much in relative terms. The stock has gone slightly down to sideways for the last year. This is opportune. this is not about making the executives whole.
Where are you getting that opinion from? The link only has charts on it. Yardeni on that link makes no such claim. How you add up information is baffling to most of us.
Well, Figure 8 is titled “Total Gross Issuance of Stocks Minus S&P 500 Buybacks”. Issuance of stock includes the stock options to executives and other employees plus other stock offerings. Stock buybacks have been greater than stock issuance for many years.
Fewer shares for the same earnings yields greater earnings per share. This has been one of the factors moving the market higher, and those invested in the market have benefited. The effect may be small but it is consistent.
Meanwhile, the company is hollowed out, equity replaced by debt. What happens when something does not go according to plan, like an increase in the interest rate on that debt, or bankers refusing to keep rolling over the ever increasing debt to infinity? What happens to most Ponzis?
Bingo!! Any more sophisticated investor can see that as plain as day.
While not true at Costco or BRK it is generally the reality. Management managing for itself not the shareholders. The offset is stock options for executives.
Um, Bed Bath & Beyond has bought $1B of its own shares in the past 18 months, leaving it with $600M in the bank. They’re also stiffing suppliers, and as they are finding out, that’s not a very good strategy to keep things on the shelves.
I wonder why they were buying back shares while noticing that their sales were declining. Precipitously. In 2017 it had annual sales of $12.3B. In the 9 months of 2022 sales were $4.2B.
“Hey, I know! Let’s buy back the stock!” What a great plan for a turnaround.
