While Black, white, and Brown working people are struggling to recover from the pandemic, C-suite executives are using legalized self-dealing to take an ever-growing share of profits. According to the Commerce Department, the last time margins were this large was 1950. Even Morgan Stanley economists are raising the alarm about the widening mismatch between what workers get paid and the profits the C-suite takes home.
And make no mistake, they are taking it home, in the form of “stock buybacks.” A buyback is when executives direct their company to purchase shares of their own stock to drive up share prices. This reduces the number of shares, raising the price and putting cash in the hands of shareholders, including the company’s own executives because they get paid mostly in stock. S&P 500 firms hit a record in the third quarter of this year, spending $225 billion to repurchase their own stock.
What’s wrong with this picture? First, stock buybacks worsen the racial wealth gap: corporate strategies to boost share prices enrich the overwhelmingly white executives and shareholders, while leaving Black and Latinx families further behind. Black and Latinx households each own only 1 percent of the total stock market value — figures that have not budged for the past 30 years — while white families hold 90 percent of the stock market value.
Second, stock buybacks exacerbate economic inequality for everyone. The wealthiest 10 percent of households control 88 percent of the stock market, and the top 1 percent alone own 53 percent of the market.