The Advisors' Blog

– Liz Dunshee

Buybacks are getting a lot of press – they’re expected to top $1 trillion this year. So it’s not too surprising that people are suggesting they’re overused – and possibly misused. For example, I blogged a few months ago on TheCorporateCounsel.net about SEC Commissioner Rob Jackson’s call for rules that would discourage insider sales after a buyback announcement (also see this Pay Governance memo – and this rebuttal from Gunster’s Bob Lamm).

So if you have a buyback program, it’s worth stepping back to review the pros & cons. This article from Gallagher’s Jim Reda analyzes whether or not shareholder concerns about “inflated” executive pay outweigh the benefit of a higher stock price – and how the Compensation Committee could address that when setting performance measures and determining how to calculate payouts. See page 6 for a couple of helpful charts about the prevalence of particular performance measures that could be impacted by buybacks – and investor views on them.

Also check out this 2016 Pay Governance research paper – which dives into some of the frequently-stated criticisms of buybacks and examines whether those are supported by empirical evidence.