Stock Buybacks, Economic Inequality, Disclosure Requirements, Market Manipulation


This note provides an overview of the intensifying debate around the impact that stock buybacks have on economic inequality and the proposals designed to reform the practice. With the advent of the Securities and Exchange Commission’s (SEC) 1982 promulgation of Rule 10b-18, corporations began allocating vast portions of their profits to stock buybacks. In recent years, this practice has become increasingly more common and has surpassed previous historical benchmarks.

Critics of stock buybacks primarily view the practice as a misuse of excess corporate funds that could instead be allocated to improve employee working conditions, benefits, and future outcomes. Opponent’s concerns surrounding buybacks and inequality have been fueled by recent corporate tax cuts under the Trump administration. In many instances, additional funds provided by these tax cuts have been used to conduct buybacks as workers’ wages remain stagnant and executive compensation becomes more frequently tied to stock-based instruments. As a result of stock price increases associated with buyback announcements, issues around the incentive for executives to initiate such programs have come into question.

In an effort to curb buybacks, many prominent lawmakers and academics have undertaken efforts to reform current regulations governing corporations conducting repurchase programs. However, proponents of buybacks believe that concerns related to buybacks impact on economic inequality are misplaced and potentially jeopardize legitimate uses of such programs. This Note examines the arguments shaping this debate and presents a reform proposal which endeavors to provide a balanced approach to regulating buybacks by modifying existing disclosure frameworks.



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.