Wall Street still loves stock buybacks

Reading time: 2 – 3 minutes

The webcast, This Week in the Boardroom, for February 25, 2010, discusses the issue of stock buybacks with Stephen Lamb, partner of Paul Weiss, a large international law firm prominent in the securities industry.

Ethics lost in legalities, canards, and obfuscation.

The discussion in this video focuses primarily on the legal and public relations issues that board members might wish to consider when the CEO of a corporation proposes a stock buyback.

Here are some of the key points that I take away from this clip:

1. Stock buybacks are now being questioned more than in the past, but the matter of ethics is not a prime concern (or even a concern at all);
2. Stock buybacks are again on the rise, but are still below pre-Crash levels;
3. The old canards of stock buybacks being just another form of dividends that are beneficial to shareholders because of increased earnings per share are still accepted wisdom;
4. The relationship between executive compensation and stock buybacks is acknowledged;
5. By law, stock buybacks cannot be undertaken unless there is a surplus, which is generally not considered to be a problem;
6. The ethics of stock buybacks or the fundamentally fraudulent nature of the practice are simply not issues that are to be considered.

Considering that the site, Boardmember.com is hosted by NYSE Euronext with the knowledge input of PriceWaterhouseCoopers and Paul Weiss, leading international firms in auditing and securities law, I would conclude that we are still a long ways from meaningful reform of capital markets.

Wall Street seems to have learned little from the Crash of 2008.

Modest stock investors looking to the long-term should not assume that corporate boards will defend their interests.

See: This Week in the Boardroom 2/25/10 Boardmember.com