Hillary Clinton Criticizes Quarterly Capitalism
Kudos to Hillary Clinton. She recently addressed the economic issue of ‘quarterly capitalism,’ or short-term business practices. Such ‘shortermism’ is when companies boost the price of their stock through stock buybacks, rather than increase the value of their company through greater productivity or investment in long-term strategies like research and development or advanced worker training.
Quarterly capitalism is bad because it does nothing to build the economy. In fact, it contributes to escalating inequality.
Bloomberg outlines Clinton’s ideas to curb quarterly capitalism.
- Overhauling capital gains taxes
- Changing taxation on executive compensation
- Reining in activist shareholders
- Disclosure of stock buybacks
In a speech directed at both middle-class families and corporate boardrooms, Clinton criticized U.S. corporations, particularly publicly traded ones, for ‘quarterly capitalism’ — taking steps to boost profits instead of plowing money into worker training, research and development, and other measures that improve corporate competitiveness and national economic growth over time. ~ Jim Tankersley, The Washington Post
Whatever one may think about her policy proposals, Hillary Clinton has put her finger on a real problem: Too many CEOs are making decisions based on short-term considerations, regardless of their impact on the long-run performance of their firms… It wasn’t always this way. As recently as 1981, buybacks constituted only 2% of the total net income of the S&P 500. But when economist William Lazonick examined the 248 firms listed continuously in this index between 1984 and 2013, he found an inexorable rise in buybacks’ share of net income: 25% in the 1984-1993 decade; 37% in 1994-2003; 47% in 2004-13. Between 2004 and 2013, some of America’s best-known corporations returned more than 100% of their income to shareholders through buybacks and dividends. [Emphasis mine.] ~ William A. Galston, The Wall Street Journal
Corporate Stock Buybacks Should Be Illegal
It is wonderful that Clinton is talking about the negative effects of quarterly capitalism on our economy. Some critics, however, suggest her proposed policies for reform lack ‘teeth.’
Gerald Epstein, of PERI, University of Massachusetts Amherst, argues that Clinton does not go far enough by just calling for transparency in ‘shortermism’, further that buybacks of corporate stocks should be made illegal. ~ TheRealNews