We all are aware of the perils of short-termism as an investment approach, and one of its nefarious manifestations is the rising issue of excessive share buybacks.
What are share buybacks and why are they inconsistent with an impact portfolio? And most relevantly - what can asset owners do to counter the public equity trend toward share buybacks?
Over the last few years, share buybacks have increased dramatically as a use of extra cash that could instead be used for capital expenditures and, in particular, for investments in the workforce in the form of training or wage increases. Given rising income inequality, excessive share buybacks looks a lot like part of the problem.
It is not often that Transform Finance and BlackRock are well aligned on an issue. Last year Larry Fink issued a strong call against share buybacks for institutional investors. We reviewed the issue and some potential engagement strategies for our community. The webinar was led by Eli Staub, Deputy Director for Research at the SEIU, who has thought about the relationship between share buybacks and inequality more than pretty much anyone else. If you are interested in joining a nascent initiative around share buybacks, please send an email to info@transformfinance.org.
