Companies could have paid workers more if they diverted stock buybacks: report

Companies could have paid workers more if they diverted stock buybacks: report

Publicly traded companies in the restaurant, retail and food manufacturing industries could have paid their workers thousands of dollars more if they had used the money they spent on stock buybacks on wages instead, according to a report released Tuesday.

"Stock buybacks greatly benefit corporate executives (who hold stock-based compensation) and market speculators, but they leave companies with fewer resources available to invest in workers and future growth," the left-leaning Roosevelt Institute and National Employment Law Project (NELP) wrote in a joint report.

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The report looked at publicly available data from 2015 to 2017, prior to the Republicans' tax cuts taking effect, but it comes as stock buybacks have increased further following the tax law's passage.

Democrats and Republicans have sparred over whether companies' share repurchases are beneficial.

Democrats have argued that buybacks are problematic because they largely benefit wealthy corporate executives and shareholders, while Republicans argue that many middle-class taxpayers can benefit because they hold stocks in their retirement accounts.

The GOP has also said that buybacks can be helpful for the economy because they can improve the efficiency of capital investments.

The paper found that from 2015 to 2017, U.S. publicly traded companies spent almost 60 percent of their profits on stock buybacks. The Roosevelt Institute and NELP also closely examined the share repurchases of companies in the restaurant, retail and food manufacturing industries — three industries that employ many low-wage workers, many of whom are women and people of color.

The groups found that publicly traded companies in the restaurant industry spent more on buybacks than it had in net profits from 2015 to 2017.

McDonald's spent more than $21 billion on buybacks during that time, which could have accounted for a raise of almost $4,000 to each of its workers, according to the report. Starbucks spent more than $5 billion on buybacks, which could have boosted its workers' wages by about $7,000.

The retail industry spent nearly 80 percent of its profits on stock buybacks between 2015 and 2017.

Home Depot and CVS could have used the money they spent on buybacks to give their workers an additional $18,000 per year, while Lowe's could have increased compensation by $19,000 per year, the report found.

The paper also found that publicly traded food-manufacturing companies spent almost 60 percent of their profits on buybacks between 2015 to 2017.

The five companies that spent the most in stock buybacks — PepsiCo, Mondelez International, Kraft Heinz, Archer Daniels Midland and Kraft Foods — could pay their median worker an average of 79 percent more per year if they had used the money they spent on buybacks on wages instead.

The Roosevelt Institute and NELP recommended that Congress ban stock buybacks as well as take other actions, such as increasing taxes on capital gains, requiring companies to set aside seats on their boards for workers' representatives and making it easier for workers to unionize.

"Policy reforms to curb the use of buybacks is a crucial (though alone an insufficient) step toward reducing the growing pay disparities between workers and executives and addressing increasing economic and racial inequality," the groups wrote.