A group of Congressmen has reintroduced a bill that would stop companies such as Alphabet, Nike and Norfolk Southern from buying back their own shares.
Speaking at a press conference in Washington D.C., on Thursday, Illinois representative Jesús “Chuy” García said that stock buybacks serve only to artificially inflate stock prices and enrich executives “at the expense of workers, consumers and the U.S. economy.”
“Stock buybacks only exist to pad the pockets of already wealthy corporate executives and shareholders,” said Garcia, a member of the House Committee on Financial Services and the Congressional Labor Caucus. “Companies buy back their stock using funds that could be used to increase worker pay or invest in resources needed to provide high-quality goods and services, leading to higher levels of inequality and business practices that can harm everyday people.”
Garcia, a co-sponsor of the Reward Work Act with fellow Democrats Peter DeFazio of Oregon and Ro Khanna of California, said that Norfolk Southern, whose train derailment caused a toxic chemical spill in East Palestine, Ohio, earlier this year, plans to shell out $7.5 billion to repurchase its own shares instead of spending the money on safety improvements and worker benefits. Alphabet, Google’s parent company, recently authorized $70 billion in stock buybacks despite laying off 12,000 employees in January. Similarly, the Just Do It firm authorized $18 billion in stock buybacks last year, “slashing already low wages and factory workers in…Asia,” he said.
“These are just three examples of an explosive trend that began during the Reagan era [of] deregulation,” Garcia said as supporters behind him held up placards with the words, “Stop Corporate Greed,” “Reward Work” and “Invest in Workers.”
Pre-Reagan, stock buybacks were “generally avoided” because they could be considered illegal market manipulation, he said. This changed in 1982, when the Securities and Exchange Commission “changed the rule,” “opening the floodgates” to “rampant use” of stock buybacks as part of a broader trend of financialization and widespread speculation.
“So how do we solve that?” Garcia asked. “Well, there’s no easy solution. We’ll need transformative change, to re-center workers and consumers in these economies. And banning buybacks is a good place to start.”
Anannya Bhattacharjee, international coordinator at the Asia Floor Wage Alliance (AFWA), a nonprofit that champions a living wage for garment workers, flew in from India to speak at the press conference. She’s criticized Nike’s use of stock buybacks before. Together with the Global Labor Justice-International Labor Rights Forum and 20 garment-sector unions from Cambodia, India, Indonesia, Pakistan and Sri Lanka, the AFWA filed an international labor complaint with the Organisation for Economic Co-operation and Development in the nation’s capital in March, accusing the sportswear titan of running afoul of the inter-governmental organization’s guidelines for responsible business conduct by multinational enterprises.
Nike, the complaint alleged, has not only contributed to “severe human rights impacts” at the factories it uses but it has also failed to address and remediate them as required by guidelines. Instead of compensating workers or investing in safety and productivity initiatives, it engages in buybacks to “falsely inflate” its stock price, it added.
“In 2020, as the Covid-19 pandemic created shutdowns and chaos throughout the world, big fashion companies, many of which are based here in the United States, made business decisions that caused a devastating human rights crisis for millions of garment workers in their supply chains,” Bhattacharjee said. “These are workers who make poverty-level wages and saw their incomes slashed or completely disappear. This was a direct violation of national laws in many countries.”
Instead of ensuring their suppliers were paying workers their legally mandated wages,
“Big Fashion” channeled that cash into stock buybacks, “further enriching their richest investors,” she added.
Bhattacharjee said that Nike, which did not respond to a request for comment, sourced from several of the factories where wage losses were documented. She referred again to the $18 billion that it put aside for stock buybacks.
“When a company like Nike emerges from a global pandemic with record sales and skyrocketing profits, we demand that it lifts the garment workers in its supply chain out of the crisis as well,” she said. “Nike sells its products with advertisements that place their swoosh logo next to the word ‘equality.’ Nike even has an ad campaign called ‘until we all win.’”
“But who is winning when Nike turns its back on economic devastation for women who make its clothing and chooses instead to funnel billions of dollars to its wealthiest investors in the form of stock buybacks?” Bhattacharjee asked.
Garcia, DeFazio and Khanna aside, the Reward Worker Act is backed by Democratic representatives Cori Bush of Missouri, Steve Cohen of Tennesee, Eleanor Holmes Norton of Washington, D.C., Pramila Jayapal of Washington, Alexandria Ocasio-Cortez of New York, Ilhan Omar of Minnesota, Mark Pocan of Wisconsin, Jan Schakowsky of Illinois, Rashida Tlaib of Michigan and Bonnie Watson Coleman of New Jersey. It’s also supported by AFL-CIO, Americans for Financial Reform, the Communications Workers of America, Public Citizen, the Institute for Policy Studies Global Economy Project, Groundwork Collaborative, Indivisible, the Service Employees International Union and Take On Wall Street.