A swathe of the world’s richest companies are so overflowing with cash that they are spending record amounts on buying their own shares.
This drives up the share price and rewards shareholders—including the directors and chief executives.
Instead of putting money into higher wages, these companies are pampering their shareholders who see the value of their shares rise and their wealth grow.
Jamie Dimon is chief executive of JPMorgan, whose board gave the green light to a £22 billion buyback programme in December. He said last month his bank was “buying back stock because our cup runneth over”.
The Financial Times newspaper said, “Companies in both the US and Europe have been reporting blowout first-quarter earnings over the past few weeks.” And this is “sending analysts scrambling to revise their expectations upwards”.
The top 500 US firms are “on course to report year-over-year earnings growth of about 50 percent”.
US companies announced £343 billion in share buybacks in the first four months of this year, according to Goldman Sachs investment bank. This is the highest such total in at least two decades.
The global tech corporations that have cashed in during the pandemic are using some of their huge profits this way. Apple spent £64 billion and Alphabet—the parent company of Google—£36 billion on buyback schemes last month.
It’s not just happening in the US.
Societe Generale investment bank predicted that buybacks in Britain and Europe could soar 25 percent above their pre-pandemic level.
British-based alcoholic drinks multinational Diageo said it expects full year “operating profit growth of at least 14 percent”. So it is “restarting its £4.5 billion share buyback and special dividend programme”.
Top boss Ivan Nenezes said, “When we have excess cash, we have been clear that we will seek to return it to shareholders.”
Oil and gas multinational BP last month said it was committed to a huge share buyback scheme.
Bernard Looney, BP chief executive, said the firm had “generated strong cash flow and delivered on our net debt target around a year early”.
Toyota has announced a £1.5 billion share buyback and forecast that annual profit will rise by 14 percent this year.
Capitalist competition means that one a few firms launch buyback schemes, shareholders everywhere demand the same. They want to make money too without actually doing any work.
Some companies even borrow money to be able to buy their own shares.
This is a great circus of obscenely wealthy people making decisions that help very rich people while workers are spurned. It has nothing to do with “rewards for risk” or any other supposed justification for capitalism.
It is yet more evidence of how those at the top have gained during the pandemic while workers faced pay cuts and job losses.