How the world has changed:
There’s something seriously wrong with an
economy that nurtures a few billionaires but can’t sustain the middle
Many factors have been blamed for the plummeting fortunes
of the American middle class: globalization, technology, deregulation,
easy credit, the winner-take-all economy, and even the inevitable tide
But one under-appreciated factor is a pervasive
business model that encourages top managers of American corporations to
loot their company for short-term gains, depriving those companies of
the funds they need to build and enlarge, and invest in their workers
for the long haul.
How do they loot their company? By using large
stock buybacks to manage the short-term objectives that trigger higher
compensation for themselves. By using those stock buybacks to manipulate
the share price, which allows them to use inside information to time
their own stock sales. By using buybacks to funnel most of the company’s
profits back to shareholders (including themselves).
They use the stock market to loot their companies.
‘buyback corporation’ is in large part responsible for a national
economy characterized by income inequality, employment instability, and
diminished innovative capacity,” wrote William Lazonick, an economics
professor at the University of Massachusetts at Lowell in a new paper published by the Brookings Institution.
What scares me is that the popular press doesn't seem to have noticed this trend. I wonder why.
The link to the story is here.