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One of CEOs’ Most Powerful Tools Is Starting to Look Dull

John Moore—Getty Images

In a Time magazine article on May 21, Rana Foroohar cites and quotes Bill Lazonick’s research on buybacks :

A lot has been made in recent years of the record amount of corporate cash on the balance sheets–around $2 trillion in U.S., and the same amount in firms’ bank accounts abroad–as well as the fact that companies aren’t spending it. But the latter isn’t totally true. Firms have shelled out some cash, just not by investing in factories or equipment or new workers. They’ve done it with share buybacks, which involves a firm buying back its own shares on the open market. This almost inevitably raises a company’s share price, thus enriching existing shareholders.

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