Today, 19 groups sent a petition to the SEC urging the Commission to initiate a rulemaking to revise Rule 10b-18 to ban stock buybacks and protect workers.
Our report found that CEOs with preliminary CHIPS agreements are sitting on company stock holdings worth more than $2.7 billion ($306 million on average). In other words, these executives are positioned to reap huge personal windfalls from share price pops related to continued buyback spending. President Biden has spoken out repeatedly against wasteful stock buybacks and his economic agenda centers on an industrial policy to create good jobs and long-term prosperity, particularly for communities and workers who’ve been left behind.
“The SEC must stand behind the need to have basic transparency around stock buybacks,” Natalia Renta, senior policy counsel for corporate governance and power at the group, said in a statement.
The Securities and Exchange Commission should re-propose its rule on disclosures of stock buybacks as soon as possible now that the unreasonably tight deadline for a court-mandated revision of the rule has passed. The Fifth Circuit Court of Appeals, alleging “defects” in a rule designed to bring transparency to stock buybacks, gave the SEC 30 days to revise the rule – an impossibly short time frame it then refused to extend upon the SEC’s request. The ruling came in response to a lawsuit by the Chamber of Commerce.
“The money that is being siphoned off from earnings to increase executive bonuses doesn’t just make wealthy insiders wealthier,” said Heather Slavkin Corzo, senior fellow at Americans for Financial Reform. “It is money that could have been used to invest in making the business more competitive and pay workers living wages.”
The groups urged the agency to abandon old rules that govern stock buybacks in light of their rampant abuse by corporate America since their enactment in 1982. Last year, the massive tax cut passed by Congress and signed into law by President Trump gave companies war chests of unprecedented size to boost share prices through stock buybacks.
The report from the Institute for Policy Studies and the Americans for Financial Reform Education Fund, Maximizing the Benefits of the CHIPS Program, analyzes the distribution of the $39 billion in subsidies for semiconductor manufacturing under the 2022 CHIPS and Science Act. It also examines the Biden administration’s initial steps to stop taxpayer money from going to share buybacks by granting preferential treatment to firms that agree to forgo all stock buybacks for five years.
AFREF, in partnership with the Institute for Policy Studies, has released a report on the 2022 CHIPS and Science Act’s $39 billion in subsidies for semiconductor manufacturing, and specifically on the Biden administration’s decision to grant preferential treatment in the awarding of these subsidies to firms that agree to forgo all stock buybacks for five years.
Washington, D.C. – President Biden’s recent budget proposal would bring billionaires and big corporations closer to paying their fair share in taxes. It would also disincentivize wasteful spending on stock buybacks.
AFREF led thirteen partners in submitting a comment letter in response to a Department of Commerce request for information on the implementation of the CHIPS incentives program. The letter describes how stock buybacks and outsized executive compensation packages undermine innovation and inclusive economic growth, and details the semiconductor industry’s track record of massive spending on stock buybacks and CEO compensation. It then recommends bright-line rules to restrict stock buybacks and executive compensation, as well as pro-worker policies that would promote innovation and inclusive economic growth.