FOR IMMEDIATE RELEASE
February 28, 2023
Commerce Department to Give Companies that Don’t Waste Money on Stock Buybacks A Leg Up in CHIPS Subsidies
Washington, D.C. – Commerce Department guidelines finalized today are a critical step in ensuring that public investment in chip makers is used for productive ends instead of squandered on stock buybacks.
“Stock buybacks line the pockets of wealthy executives with money that would be better spent on innovation, workers’ safety and wages, consumer protection, and other long-term investments necessary for sustainable and equitable economic growth,” said Natalia Renta, senior policy counsel for corporate governance and power at Americans for Financial Reform Education Fund. “Public money should be used for the public good as Congress intended when it passed the CHIPS and Science Act, instead of squandered on stock buybacks.”
In his annual letter to Berkshire Hathaway shareholders published last weekend, Warren Buffett said anyone criticizing buybacks is “an economic illiterate or a silver-tongued demagogue.” In fact, decades of research and common sense – stock buybacks were largely illegal until 1982 – underscore the harms involved.
“Buffett’s disdain is likely a direct result of the growing recognition of the harms of stock buybacks and the emerging consensus on the need for restrictions on them,” said Renta. “Critics are gaining ground in the fight to curb a practice that exacerbates economic inequality and the racial wealth gap.”
With these new guidelines, companies applying for subsidies will need to provide information about their plans for stock buybacks over the next five years. The Commerce Department will give preference to applicants that credibly commit to investing in the domestic semiconductor industry and refrain from stock buybacks.
For more information, read AFR’s comment letter to the Commerce Department calling for stock buybacks restrictions in the implementation of the CHIPS subsidies and a blog post about stock buybacks more generally.