Corporate profits

Record company profits, record share buybacks, and consider taxing them

As black, white and brown workers struggle to recover from the pandemic, leaders of the C-suite are using legalized self-operation to take an ever-increasing share of the profits. According to the Commerce Department, the last time margins were this large was in 1950. Even economists at Morgan Stanley are sounding the alarm bells about the growing mismatch between what workers are paid and the profits that the general management brings to the house.

And make no mistake, they are taking it home, in the form of “share buybacks”. A buyout is when executives ask their company to buy shares of their own stock to drive up the stock price. This reduces the number of shares, raises the price, and puts money in the hands of shareholders, including the company’s own executives, because they are paid primarily in shares. S&P 500 companies hit a record high in the third quarter of this year, spending $ 225 billion to buy back their own shares.

What’s wrong with this image? First, share buybacks widen the racial wealth gap: Corporate strategies to raise the price of shares enrich predominantly white executives and shareholders, while leaving black and Latin families further behind. Black and Latin households each hold just 1% of the total market value – numbers that have not budged in the past 30 years – while white families hold 90% of the market value.

Second, share buybacks exacerbate economic inequalities for everyone. The richest 10 percent of households control 88 percent of the stock market, and the richest 1 percent alone own 53 percent of the market.