Sen. Elizabeth Warren on Tuesday lambasted share buybacks as market manipulation made to pump up executive pay, calling them a poor use of excess business profits that could rather be reinvested in a company or workers. Asked by CNBC’s Joe Kernen whether buybacks might be wholly bad if they increase the worth of existing shares held by long time financiers or retirement funds, Warren doubled down. “This is nothing however paper adjustment. ‘Everybody’s doing much better’? Listen to yourself!” she told the “Squawk Box” co-host. “Nothing about business changed. They’re still ending up the very same number of widgets at the very same cost and selling them to the very same clients.” She argued that stock repurchases do nothing to improve the quality of a company or the products and services it produces. “They got a little fluff-and-buff in their stock. And how did they do that? By taking their excess cash and stating, ‘Geez, we can’t determine anything to do with this money. We’re not going to give it back to our financiers. We’re going to make the financial investment choice that the only financial investment in America that makes any sense is to redeem our own stock.'”.
Presidential candidate Elizabeth Warren addresses her advocates in Manchester. Preston Ehrler|LightRocket|Getty Images.
Rather, she asserted that buybacks are a convenient way to pump recurring business profits into the market in order to increase the wealth of the company’s leading investors, which often include executives and business management. “Squawk Box” co-host Becky Quick asked Warren to discuss the difference between a business board authorizing a billion-dollar stock buyback program and one business partner buying out a partner who wishes to sell his equity in their theoretical business. “If you wish to purchase your partner’s shares and you want to hold your partner’s shares, that’s great,” Warren stated. “However that’s not what share buybacks are. Share buybacks are going into the market and pumping up the price of your shares by using your own cash, not to buy business.” The Massachusetts Democrat recommended that quarterly dividends are a better, less manipulative, way to return corporate money to stakeholders. Buybacks and dividends are thought about two of the most proactive ways a business can return wealth to its stakeholders and reinvest excess money in itself. When a business repurchases exceptional shares, it reduces those offered in the market and the relative ownership stake of each existing financier increases.