Stock Buyback Programs: Boon for Shareholders or Executives?
The Story: The Wall Street Journal recently reported that researchers have observed that stock buyback programs are becoming more popular among public companies. For context, buyback programs were responsible for almost a fifth of all EPS growth in 2012.
If companies in the S&P 500 implement the proposed stock buyback programs in 2013, those repurchases will amount to approximately 1% of all trading for the year. While these stock buyback programs return cash to shareholders, increase earnings per share and are generally viewed as investor-favorable, some executives may be encouraged to unnecessarily repurchase company stock if their incentive compensation is tied to reaching certain EPS targets.