“Stock-based compensation plans for corporate executives are the main driving force behind the stock buyback binges. Professor William Lazonick writes, “Stock-based instruments make up the majority of the executives’ pay, and in the short term buybacks drive up stock prices.” Additionally, he states that in the mid-1980s, the adoption of rule 10b-18 by the Securities and Exchange Commission (SEC) gave the corporate executives a safe harbor against stock price manipulation charges. This ruling led to the stock buybacks becoming the conduit for depleting and thereby weakening balance-sheets.
[Click HERE to read more]The COVID-19 Pandemic Exposes Balance-Sheet Frailties. It Is Time To Enforce Fiscal Discipline!
