Assessing the "Exec Comp" Critisism of Buybacks

Pay Governance recently released a viewpoint analyzing repurchase and incentive compensation data and provides the following key takeaways:

  • While most S&P 500 companies conducting buybacks in 2018–2021 did not adjust performance goals or incentive awards to account for the lower share count post-buyback, those conducting the largest buybacks tend to adjust goals or incentive awards to offset for the impact.
  • Although the use of per share metrics is common in incentive plans, most of these companies balance per share metrics with other performance categories, reducing the impact buybacks have on incentive payouts.
  • Shareholder returns for companies in our sample conducting buybacks are similar to returns for non-buyback companies, thus dispelling the notion that companies conduct buybacks to inflate stock prices to the benefit of management.– The majority of activist share repurchase demands are successful.

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