Should boards reexamine stock buybacks? Companies routinely adopt and typically justify programs to repurchase their shares for the following reasons, among others:
Produces highest return on invested capital when holding excess cash or credit is available at attractive rates
Boosts stock prices in the short term
Helps manage stock option overhang
Signals the company’s view that its stock is undervalued in the market and management’s confidence in the future of the company
Even Apple announced this week plans to increase its $10 billion stock buyback program announced last year to $60 billion through 2015.
But despite the popularity of such programs,
financial advisers are increasingly criticizing them as mere accounting maneuvers to increase earnings per share without any substantive improvement to the company’s performance. While perfectly legal and well within the protection of the business judgment rule, should boards look more closely at what these programs entail, how they are justified and what unintended consequences may ensue?
Loading more stuff…
Hmm…it looks like things are taking a while to load. Try again?