U.S. Representative Jesus Garcia (D-IL) speaks in opposition to Title 42 during a news conference outside the U.S. Capitol in Washington, U.S., April 28, 2022.Â
Elizabeth Frantz | Reuters
WASHINGTON — House Democrats on Thursday reintroduced a bill that may ban open-market stock buybacks, weeks after the Securities and Exchange Commission released stringent buyback disclosure rules.
The Reward Work Act would prohibit firms from increasing the worth of their market shares by buying back shares on the open market. Lawmakers said it could also level the playing field for staff by stopping trillions in spending on buybacks as an alternative of salaries.
The bill “also gives staff a voice on corporate boards,” Rep. Jesus Garcia, D-Sick., certainly one of the bill’s co-sponsors, said Thursday.
“Stock buybacks allow corporations to buy shares of their very own stock price on the expense of staff, consumers and the U.S. economy,” Garcia said. “Almost every corporation has participated in these practices.”
Reps. Ro Khanna, D-Calif., and Val Hoyle, D-Ore., also co-sponsored the bill. With Republicans holding a slight majority, it’s unlikely the bill get through the House.
“It is also critical and a vital a part of this bill that we give staff a voice that’s proportional to the worth that their labor provides to the corporation,” Hoyle said Thursday.
U.S. corporate stock buybacks grew from a complete of $950 billion in 2021 to over $1.25 trillion last yr, SEC Chairman Gary Gensler said earlier this month.
The commission recently introduced rules starting within the fourth quarter of this yr to extend the transparency of buyback behavior and permit investors “to higher assess issuer buyback programs” as corporate repurchasing reaches record highs.
Last month, the board of Google parent Alphabet announced it had approved $70 billion in stock buybacks this yr, matching its 2022 rate. Apple will even repeat its 2022 performance by repurchasing $90 billion in shares this yr.
Garcia said that railroad company Norfolk Southern spent $3.4 billion on buybacks within the yr leading as much as the February train derailment in East Palestine, Ohio, that spilled hazardous chemicals in the world.
“Now Norfolk Southern plans to spend almost 1,000 times the quantity that they’re paying the victims: $7.5 billion on buybacks,” he said. “That is money that would as an alternative be spent on basic safety improvements and employee advantages.”
Norfolk Southern declined to comment on the laws.
Record repurchasing began in 1982 after the SEC passed a rule exempting buybacks, however the Tax Cuts and Jobs Act signed into law by former President Donald Trump also enabled corporations to freely repurchase to pay out shareholders and executives, the lawmakers said. Compensation for top executives can be often tied to stock performance.
“We’ll need transformative change to recenter staff and consumers in our country’s economy,” Garcia said. “And banning the stock buybacks is a superb place to start out.”
Eleven Democratic members of the House, together with 4 senators, including Sen. Bernie Sanders, I-Vt., signed onto the Reward Work Act when it was first introduced in 2019. Garcia and Khanna reintroduced it again last yr as a companion to laws proposed by Sen. Tammy Baldwin, D-Wis.
