The thing that really protects them is refusal to use anti-trust law to break these large uncompetetive monopolies up. A signal is when these companies begin to engage in massive stock repurchase programs.
Returning money to investors is great, whether it’s buybacks or dividends. It’s the core purpose of a company. The primary alternative is growing the bigcorps ever bigger, more powerful, and dangerous. Ever-expanding bloated conglomerates.
The good argument against buybacks is that companies tend to do it when the stock is high, and that’s bad for the shareholders.
I feel like there’s probably a more meaningful counterpoint to be presented here than a legal document which describes the purpose of J&J as, quote, “to engage in any activity within the purposes for which corporations may be organized under the New Jersey Business Corporation Act.”
Do you have a document stating that J&J's purpose is to buy back stocks?
As it stands, I have a legal document under penalty of perjury that says their purpose is to do business as allowed by NJ. And you _just_ have a statement made by yourself without penalty that their purpose is to return money to investors.
Sure, my document doesn't say they can't do buybacks. But to say the document calls it their purpose is highly misleading.
Stock buybacks are economically equivalent to paying dividends, but they’re less costly from a tax perspective. Are dividends also to be banned? If so, what is even the purpose of a company, and who would possibly invest in a it knowing that it can’t pay any returns?
Buybacks don’t interfere with public ownership. They just boost the share price. Any member of the public who wants to remain a shareholder just… doesn’t sell his shares.
If buybacks and dividends are the same thing, then why even allow both to exist? Just eliminate buybacks and enjoy the higher tax revenue. And maybe also accompany it with a tax cut on dividends to even things out slightly. We want companies to become more efficient and increase productivity, but we also want society to benefit from that in the form of higher tax revenue. Eliminating buybacks accomplishes both.
Buybacks juice earnings per share. Stock valuation uses P/E ratio as an input. Meaning buybacks disproportionately benefit upper management, whose compensation is tied to the stock price. There's a principal agent problem here. Management may elect to do a buyback even if it's not in the company's best interest. Dividends don't have that problem.
I suspect your question is rhetorical but I, and quite a few other Marxists, would say yes. Dividends, stock buybacks and other types of profit should be banned.
My issue is with the concentrated control of where the surplus value goes, I see the existence of dividends & stock buybacks as more of a side-effect of the system than a core-problem.
