20 ms·

No. Generally speaking, I want corporations to return capital in excess of operating needs to shareholders unless they have actual high-expected-return, ready-t

No. Generally speaking, I want corporations to return capital in excess of operating needs to shareholders unless they have actual high-expected-return, ready-to-be-executed plans for what to do with their money. When corporations just invest because they have money, there is a gigantic agency problem, and executives have a tendency to burn shareholder value on vanity projects and fancier headquarters. Stock buybacks are exactly what I want wealthy companies to be doing with money they don't have a high expected ROI for.

BobaFloutist 1y ago
Or even dividends, once they've set up a solid rainy-day fund. Anyone remember dividends?
- ac29 1y ago
  Roughly 80% of SP500 companies pay dividends
  - throwaway2037 1y ago
    There is a good reason for it: Many pension funds and large money managers have a hard rule that they will not invest at full into a company without a dividend. I'm not saying that you have to agree with that strategy, but it is incredibly common for US pension managers. Also, some stocks pay one cent as their div, just to qualify.
piva00 1y ago
No stock buybacks, pay dividends, that's why the instrument exists. Stock buybacks are an aberration of hyperfinancialisation, just pay the shareholders proportionally to what they own.
- rcxdude 1y ago
  The only reason there's a difference is because of the psychological and incentive-based effects of 'number go up'.
- legitster 1y ago
  Dividends don't currently get the same tax advantages in the US, so until tax policy gets revised, it's better for the shareholders in question if there's a buyback. There's also the matter that dividends are meant to be long-term and recurring. So it's not great for one-time windfalls.
- hopelite 1y ago
  Buybacks are in effect and by definition a kind of fraud even if people make excuses for it or do not want to see it that way. It's the equivalent of a vested interest driving up an auction price or, you know, buying a bunch of your own product and then using the "sales" figures to convince others to invest or buy your product at a higher rate/price due to artificial scarcity. The fact that c-suites authorize buybacks largely to boost the stock price in order to trigger their own performance bonuses tied to the stock price only highlights that point. If you did something even remotely similar, you would be prosecuted for fraud, because it's fraud. 1) Wrongful or criminal deception intended to result in financial or personal gain. 2) A person or thing intended to deceive others, typically by unjustifiably claiming or being credited with accomplishments or qualities. The problem though is that the incentive structure is so that none of the involved parties has any disincentive, let alone an adversarial incentive to end the practice, let alone has standing to do anything legally, short of sabotaging their own stock value. It's a totally perverse and corrupted incentive structure, similar to why both Trump or Biden, or Democrats or Republicans have the real will or interests in ... non of the involved parties have any interest in revealing the rot and corruption, and all parties involved have every incentive to keep it all under wraps, suppressed, covered, up and distracted from. In some ways, a civil activist organization could in fact buy a single stock of one of the most egregious stock buyback stock price inflation causing corporations and sue them for fraud and deception, but it would have to come with a claim at manipulation of the market due to fraudulent manipulation of the price discovery process similar to a light version of cornering the market through restriction of supply, i.e., cartel behavior.
  - mercutio2 1y ago
    Do you realize how extensively companies have to document their buybacks? Who is deceived? There is zero fraud implied or even suggested by stock buybacks. They are heavily-publicized-in-advance returns of capital to shareholders. That's it. The sales are often offset by the creation of new stock via RSUs, and in that case just reduce the dilution intrinsic to RSUs. Shareholders want executives to be incentive-aligned to reduce agency problems. Stock based compensation furthers that goal. If a manager doesn't think they have a better use of spare capital than returning it to shareholders, returning the capital is exactly what shareholders want. There's nothing nefarious here.
- erentz 1y ago
  Companies should buy back their stock if their stock is undervalued. This anti stock buyback meme is silly. It’s like people who are anti shorting stock. Companies list on the stock exchange in order to sell their own stock to raise capital. If they have excess capital, absolutely they should be able to buy back their stock. And buy other companies stock if they see it as undervalued also.
  - piva00 1y ago
    It's not silly, it's a terrible incentive for companies flush with cash and paying bonuses to their executives in stocks, it becomes very easy to manipulate the stock price with stock buybacks for a larger bonus while letting the company flailing with underinvestment (or simply missed investments). A great case to see the absurdity of it is Intel, doing stock buybacks for almost a decade to push its stock price up while flailing around and losing its edge, if it was paying high dividends while flailing around then major shareholders would be asking why the fuck would they be paying dividends while the business is losing competitiveness but by doing stock buybacks it kept investors "happy" so they could jump ship and let the company fail on its own. Stock buybacks have perverse incentives, everyone responsible for keeping the company in check gets a fat paycheck from buybacks: executives, major investors, etc., all financed by sucking the coffers dry. The buybacks at Intel just made the company as a whole lose money, they bought back stocks when they were high and it only dipped since then (10y window).
    - erentz 1y ago
      The shareholders got what they wanted with Intel. If it was the wrong decision for Intel doesn’t mean it’s the wrong decision for everyone and should be banned. The idea that the stock market can only be used to flow shares in one direction has no merit. If you want to regulate executive compensation do that with direct clear regulation on executive compensation, not via some indirect rule change on the stock market.
      - piva00 1y ago
        Stock buybacks are the indirect rule, it wasn't even allowed for most of the existence of stock markets, it's the odd one out which created perverse incentives. It's not about regulating executive compensation, it's to close a gap that was opened and only led to poorer decision making at the executive/board level, there's no advantage to the company. It's a stupid instrument with no reason to exist except to return money to shareholders in a way they can avoid taxation events.
- throwaway2037 1y ago
  If you asked CFOs why they choose stock buyback over dividends, it is simple: tax efficiency. When you pay divs, holders are required to pay tax immediately. Buybacks act like reinvestment and are not taxed until the holder sells their shares.
screature2 1y ago
Not entirely disagreeing, but Intel feels more like a poster child of buybacks that (in hindsight and in comparison with their peer group) would have been much better spent reinvested into the company https://www.ineteconomics.org/perspectives/blog/how-intel-financialized-and-lost-leadership-in-semiconductor-fabrication https://www.ineteconomics.org/perspectives/blog/how-intel-fi...: * they've done about $152B in stock buybacks since 1990 https://www.intc.com/stock-info/dividends-and-buybacks https://www.intc.com/stock-info/dividends-and-buybacks. I think... ~$108B in the last decade. * during the same time period they fell behind TSMC and SEC in semiconductor fab , missed the boat on mobile (couldn't really capture the market for either smartphone or tablet CPUs), and are missing the boat w/AI training https://www.hpcwire.com/2025/07/14/intel-officially-throws-in-training-towel-will-focus-on-edge-and-agentic-ai/ https://www.hpcwire.com/2025/07/14/intel-officially-throws-i... Discussion of Intel's buyback behavior as excessive and wasteful was also picked up on during all the discussion of CHIPs subsidies last year: https://news.ycombinator.com/item?id=39849727 https://news.ycombinator.com/item?id=39849727 see also https://ips-dc.org/report-maximizing-the-benefits-of-the-chips-program/ https://ips-dc.org/report-maximizing-the-benefits-of-the-chi...
- mercutio2 1y ago
  Intel did not do a good job with its (sizable) investments for the last decade. There's little reason (at least for me, a casual observer of their failure to deliver good chips) to think they would have done a better job by just throwing (more) money at the problems they were trying to solve. The existence of markets Intel didn't dominate does not, to me, imply that it would have been a good use of resources to throw (more) money at the markets they didn't dominate. Not every company is good at every business, even if they dominate some seemingly related market.
  - triknomeister 1y ago
    Intel is the corporate version of Germany.
matthewdgreen 1y ago
On the other hand, the Shanghai stock index has been basically flat for years, despite Chinese companies rapidly growing and dominating industry after industry. Our companies have been very good at returning value to shareholders, while Chinese companies have been re-investing. There’s a very real possibility that we may come to deeply regret it.
- kccqzy 1y ago
  Because China is starting from a position of weakness and catching up, it is by definition easier for them to find high ROI projects to spend money on. Just wait 10–20 years when China is thoroughly technically ahead of us, and Chinese companies will be more like American ones.
  - matthewdgreen 1y ago
    China is massively investing in the entire energy generation sector, renewables, advanced nuclear, batteries, EVs, full self driving. This is the future we were supposed to be investing in, but we’re losing it. Maybe we got some share buybacks instead.
    - K0balt 1y ago
      My concern is that America will become a sprawling no man’s land as the economy contracts to 20 percent of its present size. Rapid collapse is unpredictable and seems like a bad idea for a country with such a huge military presence.
      - ben_w 1y ago
        Rapid collapse is indeed unpredictable, and always bad; but the military is heavily dependent on the economy, so it starting huge probably won't make a huge difference. Especially if the US happens to do the collapsing at around the same time the rest of the globe moves away from oil etc., given how dependent the existing military equipment stockpiles are on petrochemicals.
    - 1y ago
triknomeister 1y ago
This is completely opposite of how budgets work inside companies. If a department has a specific budget, then it is generally considered very bad to return part of it ever. Instead, they just find new things to do with it. Now, of course, sometimes, the new things are vanity projects, but I find that 80% of times those are actually very good investments.
- mercutio2 1y ago
  You just described an agency problem. Investors in a corporation don't want individual teams to spend money "just because it was budgeted, even if we didn't have a good thing to spend it on". I, as a manager of a team at a corporation, of course have a partially adversarial relationship with investor goals; I want my team to be happy, in part because happier teams often are more productive, but in large part also because it's just nice to spend my work life working side by side with people who are enjoying their perks. If my entertainment budget directly (or even partially) reduced my team's bonus pool, that would be crappy for team cohesion, but it would probably make me think more carefully about taking everyone out to lunch.

BobaFloutist 1y ago

Or even dividends, once they've set up a solid rainy-day fund. Anyone remember dividends?

ac29 1y ago
Roughly 80% of SP500 companies pay dividends
- throwaway2037 1y ago
  There is a good reason for it: Many pension funds and large money managers have a hard rule that they will not invest at full into a company without a dividend. I'm not saying that you have to agree with that strategy, but it is incredibly common for US pension managers. Also, some stocks pay one cent as their div, just to qualify.

piva00 1y ago

No stock buybacks, pay dividends, that's why the instrument exists. Stock buybacks are an aberration of hyperfinancialisation, just pay the shareholders proportionally to what they own.

rcxdude 1y ago
The only reason there's a difference is because of the psychological and incentive-based effects of 'number go up'.
legitster 1y ago
Dividends don't currently get the same tax advantages in the US, so until tax policy gets revised, it's better for the shareholders in question if there's a buyback. There's also the matter that dividends are meant to be long-term and recurring. So it's not great for one-time windfalls.
hopelite 1y ago
Buybacks are in effect and by definition a kind of fraud even if people make excuses for it or do not want to see it that way. It's the equivalent of a vested interest driving up an auction price or, you know, buying a bunch of your own product and then using the "sales" figures to convince others to invest or buy your product at a higher rate/price due to artificial scarcity. The fact that c-suites authorize buybacks largely to boost the stock price in order to trigger their own performance bonuses tied to the stock price only highlights that point. If you did something even remotely similar, you would be prosecuted for fraud, because it's fraud. 1) Wrongful or criminal deception intended to result in financial or personal gain. 2) A person or thing intended to deceive others, typically by unjustifiably claiming or being credited with accomplishments or qualities. The problem though is that the incentive structure is so that none of the involved parties has any disincentive, let alone an adversarial incentive to end the practice, let alone has standing to do anything legally, short of sabotaging their own stock value. It's a totally perverse and corrupted incentive structure, similar to why both Trump or Biden, or Democrats or Republicans have the real will or interests in ... non of the involved parties have any interest in revealing the rot and corruption, and all parties involved have every incentive to keep it all under wraps, suppressed, covered, up and distracted from. In some ways, a civil activist organization could in fact buy a single stock of one of the most egregious stock buyback stock price inflation causing corporations and sue them for fraud and deception, but it would have to come with a claim at manipulation of the market due to fraudulent manipulation of the price discovery process similar to a light version of cornering the market through restriction of supply, i.e., cartel behavior.
- mercutio2 1y ago
  Do you realize how extensively companies have to document their buybacks? Who is deceived? There is zero fraud implied or even suggested by stock buybacks. They are heavily-publicized-in-advance returns of capital to shareholders. That's it. The sales are often offset by the creation of new stock via RSUs, and in that case just reduce the dilution intrinsic to RSUs. Shareholders want executives to be incentive-aligned to reduce agency problems. Stock based compensation furthers that goal. If a manager doesn't think they have a better use of spare capital than returning it to shareholders, returning the capital is exactly what shareholders want. There's nothing nefarious here.
erentz 1y ago
Companies should buy back their stock if their stock is undervalued. This anti stock buyback meme is silly. It’s like people who are anti shorting stock. Companies list on the stock exchange in order to sell their own stock to raise capital. If they have excess capital, absolutely they should be able to buy back their stock. And buy other companies stock if they see it as undervalued also.
- piva00 1y ago
  It's not silly, it's a terrible incentive for companies flush with cash and paying bonuses to their executives in stocks, it becomes very easy to manipulate the stock price with stock buybacks for a larger bonus while letting the company flailing with underinvestment (or simply missed investments). A great case to see the absurdity of it is Intel, doing stock buybacks for almost a decade to push its stock price up while flailing around and losing its edge, if it was paying high dividends while flailing around then major shareholders would be asking why the fuck would they be paying dividends while the business is losing competitiveness but by doing stock buybacks it kept investors "happy" so they could jump ship and let the company fail on its own. Stock buybacks have perverse incentives, everyone responsible for keeping the company in check gets a fat paycheck from buybacks: executives, major investors, etc., all financed by sucking the coffers dry. The buybacks at Intel just made the company as a whole lose money, they bought back stocks when they were high and it only dipped since then (10y window).
  - erentz 1y ago
    The shareholders got what they wanted with Intel. If it was the wrong decision for Intel doesn’t mean it’s the wrong decision for everyone and should be banned. The idea that the stock market can only be used to flow shares in one direction has no merit. If you want to regulate executive compensation do that with direct clear regulation on executive compensation, not via some indirect rule change on the stock market.
    - piva00 1y ago
      Stock buybacks are the indirect rule, it wasn't even allowed for most of the existence of stock markets, it's the odd one out which created perverse incentives. It's not about regulating executive compensation, it's to close a gap that was opened and only led to poorer decision making at the executive/board level, there's no advantage to the company. It's a stupid instrument with no reason to exist except to return money to shareholders in a way they can avoid taxation events.
throwaway2037 1y ago
If you asked CFOs why they choose stock buyback over dividends, it is simple: tax efficiency. When you pay divs, holders are required to pay tax immediately. Buybacks act like reinvestment and are not taxed until the holder sells their shares.

screature2 1y ago

Not entirely disagreeing, but Intel feels more like a poster child of buybacks that (in hindsight and in comparison with their peer group) would have been much better spent reinvested into the company https://www.ineteconomics.org/perspectives/blog/how-intel-financialized-and-lost-leadership-in-semiconductor-fabrication https://www.ineteconomics.org/perspectives/blog/how-intel-fi...: * they've done about $152B in stock buybacks since 1990 https://www.intc.com/stock-info/dividends-and-buybacks https://www.intc.com/stock-info/dividends-and-buybacks. I think... ~$108B in the last decade. * during the same time period they fell behind TSMC and SEC in semiconductor fab , missed the boat on mobile (couldn't really capture the market for either smartphone or tablet CPUs), and are missing the boat w/AI training https://www.hpcwire.com/2025/07/14/intel-officially-throws-in-training-towel-will-focus-on-edge-and-agentic-ai/ https://www.hpcwire.com/2025/07/14/intel-officially-throws-i... Discussion of Intel's buyback behavior as excessive and wasteful was also picked up on during all the discussion of CHIPs subsidies last year: https://news.ycombinator.com/item?id=39849727 https://news.ycombinator.com/item?id=39849727 see also https://ips-dc.org/report-maximizing-the-benefits-of-the-chips-program/ https://ips-dc.org/report-maximizing-the-benefits-of-the-chi...

mercutio2 1y ago
Intel did not do a good job with its (sizable) investments for the last decade. There's little reason (at least for me, a casual observer of their failure to deliver good chips) to think they would have done a better job by just throwing (more) money at the problems they were trying to solve. The existence of markets Intel didn't dominate does not, to me, imply that it would have been a good use of resources to throw (more) money at the markets they didn't dominate. Not every company is good at every business, even if they dominate some seemingly related market.
- triknomeister 1y ago
  Intel is the corporate version of Germany.

matthewdgreen 1y ago

On the other hand, the Shanghai stock index has been basically flat for years, despite Chinese companies rapidly growing and dominating industry after industry. Our companies have been very good at returning value to shareholders, while Chinese companies have been re-investing. There’s a very real possibility that we may come to deeply regret it.

kccqzy 1y ago
Because China is starting from a position of weakness and catching up, it is by definition easier for them to find high ROI projects to spend money on. Just wait 10–20 years when China is thoroughly technically ahead of us, and Chinese companies will be more like American ones.
- matthewdgreen 1y ago
  China is massively investing in the entire energy generation sector, renewables, advanced nuclear, batteries, EVs, full self driving. This is the future we were supposed to be investing in, but we’re losing it. Maybe we got some share buybacks instead.
  - K0balt 1y ago
    My concern is that America will become a sprawling no man’s land as the economy contracts to 20 percent of its present size. Rapid collapse is unpredictable and seems like a bad idea for a country with such a huge military presence.
    - ben_w 1y ago
      Rapid collapse is indeed unpredictable, and always bad; but the military is heavily dependent on the economy, so it starting huge probably won't make a huge difference. Especially if the US happens to do the collapsing at around the same time the rest of the globe moves away from oil etc., given how dependent the existing military equipment stockpiles are on petrochemicals.
  - 1y ago

triknomeister 1y ago

This is completely opposite of how budgets work inside companies. If a department has a specific budget, then it is generally considered very bad to return part of it ever. Instead, they just find new things to do with it. Now, of course, sometimes, the new things are vanity projects, but I find that 80% of times those are actually very good investments.

mercutio2 1y ago
You just described an agency problem. Investors in a corporation don't want individual teams to spend money "just because it was budgeted, even if we didn't have a good thing to spend it on". I, as a manager of a team at a corporation, of course have a partially adversarial relationship with investor goals; I want my team to be happy, in part because happier teams often are more productive, but in large part also because it's just nice to spend my work life working side by side with people who are enjoying their perks. If my entertainment budget directly (or even partially) reduced my team's bonus pool, that would be crappy for team cohesion, but it would probably make me think more carefully about taking everyone out to lunch.