03.07.18

U.S. Senator Tammy Baldwin and Senate Democratic Leader Chuck Schumer Introduce Amendment to Rein in Corporate Stock Buybacks in Banking Deregulation Bill

Following passage of the GOP Tax Scam bill, corporations have announced more than $200 billion in corporate share buybacks, overwhelmingly benefiting corporate executives and wealthy shareholders, while workers get pink slips

WASHINGTON, D.C. – Seizing on the surge in corporate stock buybacks, U.S. Senator Tammy Baldwin and Senate Democratic Leader Chuck Schumer are introducing an amendment today to the banking deregulation bill that would stop the growing trend of corporate tax breaks going towards stock buybacks.

Since the Republican tax bill passed, corporations have announced more than $200 billion in stock buybacks, overwhelmingly benefiting corporate executives and wealthy shareholders, and leaving the middle class behind. Some corporations have announced a massive corporate buyback while laying off American workers. Now, independent analyses show these giveaways to the wealthy have dramatically increased following the passage of the Republican tax law and are on a record pace.

The Baldwin-Schumer amendment would give the U.S. Securities and Exchange Commission (SEC) the authority to reject buybacks that come at the expense of workers. It would also require company boards and their executives to ‘put their money where their mouth is’ and certify that the buyback is in the best long-term financial interest of the company.

“Instead of rolling back regulations put in place to protect consumers and taxpayers from Wall Street’s recklessness, we should be ensuring that profits are being shared with the workers who actually create value. It’s just wrong for big corporations to pocket massive, permanent tax breaks and reward the wealth of top executives with more stock buybacks, while closing facilities and laying off workers,” said Senator Baldwin. “It’s clear to me that the poor management decisions made by self-interested executives who are seeking short-term profits are driving wealth inequality and wage stagnation in our country. This amendment requires the SEC to do what I have been asking for years—provide stronger oversight of corporate stock buybacks.”

“The Republican promise that their tax bill would line the pockets of workers has proven to be the scam Democrats predicted. Nearly every day there is a new story to tell about a corporation actively choosing to – through share buybacks -- pass along their new savings from the tax law to wealthy shareholders and corporate executives, not the workers or consumers. Senate Democrats have a plan to rein in these buybacks and put the middle class - not the wealthiest – first and will fight to make this one of our top amendments over the coming days,” said Senate Democratic Leader Chuck Schumer.

“Despite Republican claims to the contrary, their tax bill is a massive giveaway to the very wealthy and big corporations. Exhibit A is the huge surge in corporate stock buybacks that we’ve seen since the bill’s passage. Those benefits go into the pockets of executives and shareholders – and foreign investors own 35 percent of U.S. corporate stock,” said Senator Van Hollen. “President Trump is quick to pay lip service to ‘forgotten men and women,’ but his actions tell a completely different story. This amendment would ensure that the SEC provides appropriate oversight over these buybacks and that American workers come first. We need to change the rules so that executives invest in their workforce rather than line the pockets of the rich.”

“Stock buybacks have been misused by some corporations to manipulate their stock prices and funnel money to their CEOs and wealthy shareholders,” said Senator Schatz. “Our legislation shuts down this practice and calls on companies to put American workers first.”

The Baldwin-Schumer amendment repeals the SEC’s rule 10b-18, meaning that executives will once again have to explain how their stock buybacks are not manipulative to the Commission, and it allows the SEC to reject buyback plans from companies for various reasons. For example, if a company has an unfunded pension liability, or if it is not giving raises to its workers in amounts commensurate with the buyback, or if it has engaged in layoffs—the SEC will take that into account and can reject the buyback. If a buyback is approved, the company must disclose to the SEC specific information about the buyback transaction. Finally, the CEO and the board of directors must certify that the buyback is in the long-term financial best interest of the company.

Across the country, there is a growing trend of big corporations using massive, permanent tax breaks for stock buybacks – choosing to reward wealthy CEOs instead of the workers who create profit and grow the company. In 2017, Wisconsin workers helped create $3.3 billion in operating profit at Kimberly-Clark. The company spent $911 million on stock buybacks last year and in December, Congress passed and President Trump signed a permanent, corporate tax cut for companies like Kimberly-Clark. Now, Kimberly-Clark announced that it will spend $900 million on stock buybacks this year and that it would close two Wisconsin manufacturing facilities in the Fox Valley that employ 610 workers. Walmart pocketed a massive tax break, gave executives $20 billion in stock buybacks in 2017, and then in January they closed Sam’s Club stores across the country, including in Madison and in West Allis. Nearly 300 jobs were eliminated and workers were laid off.

In addition to Senator Baldwin and Senate Democratic Leader Schumer, the amendment is cosponsored by Senators Chris Van Hollen (D-MD) and Brian Schatz (D-HI).