 | May 15th Senate Hearings on Oil and Gas: We May Have A Problem | The Oil Drum | Implications of "Peak Oil" for Atmospheric CO2 and Climate |  |
Search The Oil Drum with Google
Recently on TOD:World
TOD:Local
- Streets: Utilitarian Corridors or Livable Public Space
- Summer Streets a Success!
- Plan for Hydro-Fracture Drilling for Unconventional Natural Gas in Upstate New York
TOD:Europe
- Oilwatch Monthly - November 2008
- The 2008 IEA WEO - Production Decline Rates
- The EU Strategic Energy Review: maybe not so depressing after all
TOD:Canada
- The Round-Up: October 24, 2008
- Compressed Air Energy Storage - How viable is it?
- Oil Megaproject Update (July 2008)
TOD:ANZ
Blogroll
Energy Sites
- The Coming Global Oil Crisis
- Die Off
- Dry Dipstick
- Energy Bulletin
- From the Wilderness
- Life After the Oil Crash
- Peak Oil Crisis
- Peak Oil News and Message Boards
- Powerswitch
- Rigzone
- Matthew Simmons
- Wolf at the Door
Environment & Sustainability Sites
- The Daily Green
- EcoGeek
- Eco Street
- Green Car Congress
- Green Options
- green.alltop.com
- Gristmill
- RealClimate
- Sustainablog
- Treehugger
- WorldChanging
Blogs
- The Big Picture
- Casaubon's Book
- Cleantech Blog
- Clusterf
k Nation (Jim Kunstler) - The Cost of Energy
- David Strahan
- The Energy Blog
- Entropy Production
- European Tribune
- GraphOilology
- jeffvail.net
- Mobjectivist
- Peak Energy (Australia)
- Peak Energy (USA)
- R-Squared
- Resource Insights
Finance & Economics Blogs
- Calculated Risk
- Ecological Economics
- Econbrowser
- Environmental Economics
- Infectious Greed
- The Mess That Greenspan Made
- Mish's Global Economic Trend Analysis
Organizations
“Of all races in an advanced stage of civilization, the American is the least accessible to long views… Always and everywhere in a hurry to get rich, he does not give a thought to remote consequences; he sees only present advantages… He does not remember, he does not feel, he lives in a materialist dream.”
—Moiseide Ostrogorski (1902, 302-303)
User login
Contact
- Content: editors at theoildrum dot com
- Tech support: support at theoildrum dot com
Personnel
- Editors: Prof. Goose, Heading Out, Stuart Staniford, Nate Hagens
- DrumBeat Editor: Leanan
- Contributors: ace, Engineer-Poet, Gail the Actuary, jeffvail, JoulesBurn, Khebab, Robert Rapier
- TOD:Local: Glenn
- TOD:Europe: Chris Vernon, Euan Mearns, Francois Cellier, Jerome a Paris, Luís de Sousa, Rembrandt, Rune Likvern, Ugo Bardi
- TOD:Canada: benk, Libelle
- TOD:ANZ: Big Gav, Phil Hart, aeldric
- Technician: Super G
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
GAIA Host Collective
Xyleth
I question that stock buy backs return money to the investors. In order to get that money, I have to sell the stock.
However, if you are a CEO or a member of the Board a large part of your money is in stock options, and raising the value of the stock artificially raises your bonus.
A much more effective way of raising stock prices is to increase dividends, but since dividends aren't paid on options, the CEO, Board and high management don't get overpaid.
I think stock buybacks should be an illegal form of stock manipulation, but I don't see any relief coming from the present administration.
But what if I am CEO, know that my business prospects are excellent, and estimate that the market is undervaluing my company by 30%? In that case, I think buybacks are a great investment. I don't see a thing wrong with that.
Absolutely correct.
First duty of any Board of Directors is to the shareholders.
If the BoD estimate that:
Selling out in a merger
OR
Buying back shares and giving shareholders capital plus equity back is better than continuing
Then there is a fiscal responsibility to say :
' Here. Take your original money plus more that we made for you. We have done all we can. Take your increased money and re-invest it.'
Mercantillist, Adventurist Capitalism 101 since the first Amsterdam Bourse.
That is how it started off. That is how it works.
And once the BoD have a majority share in control, then they can:
Buy up others.
Award remuneration packages that reflect 'the GMR for execs...'
Close it down
Whatever.
This is just the way it works since the first, returning spice ships were sighted off the Hook van Holland.
Back then they didn't quite have the hedge funds buying up real assets with printed toilet paper.
Seems to me that buying back large amounts of shares that can be voted gives some protection. Large cash reserves are a open invitation to a hostile takeover by the thieves.
Exactly right. There are longer term flexibility issues at stake as well--higher dividend payouts might have to be cut in future down years, and nobody likes that. If buying back stock gives a competitive return on capital, that's what management is supposed to do.
In Australia an off market buyback can be great of shareholders..
I have a share which I brought four months ago for just under AUD $10. The company are offering to buy some or my shares for 14% less than the market price.
This sounds like a looser, but for someone in my situation, I will get a tax rebate from the government so that actually get about $1.50 more than the market price. All 100% legal and well known. The rebate is because the company has paid tax and the shareholders get a credit for this tax.
Not being a dummy, I will offer all my shares - and then will buy them back on market. I will be lucky if the accept 10% of them,
Better control of management by the shareholders would prove more beneficial, albeit not as easy.
The big advantage to shareholders of stock buy-backs is a lower tax rate. Capital gains get taxed at a lower rate than do dividends. It's true that you have to sell stock to enjoy the benefit... I guess there's a brokerage commission as an extra tax, versus just depositing a dividend check. But the tax advantage outweighs that very quickly.
it's true though that stock buy-backs do profit holders of options disproportionately. If the buy-backs just balance the extra shares generated by the holders of the options... maybe that is better for shareholders than just paying big bonuses to the execs. At least it motivates the execs to keep the price up. It does have the downside though of being a temptation to manipulate the price.
The main point is really to understand how the overall level of executive compensation is set. Does the typical board of directors do a good job of oversight and of representing the interest of the shareholders?
JimK, Bullcorn, anytime somebody mentions tax advantages before return on investment I keep my money.
The plain fact is I know my own needs and desires and can get them with money. And since stock prices are at least occasionaly based on real returns, high dividends and special dividends make the price go up, but it benefits stockholders as much as options holders.
Of course the talking heads on the financial news programs favor buybacks-they're hired and paid by the primary beneficiaries of the stock watering called options. As I said above, this should be illegal.
Currently in the U.S. both Capital Gains and Dividends are taxed at 15% unless the dreaded AMT gets her hands in your knickers. Who knows what will happen after these investor friendly rules sunset in the U.S. in 2010.
As for me I say give me the dividends I hate stock buybacks they are only good for the management at the top of the food chain. Studies show high dividend payers are the most disciplined users of capital and provide the greatest returns to investor. Besides I can reinvest the cash flow as I see fit either in more of their stock or other.