Former Goldman Sachs CEO Lloyd Blankfein weighed in on the debate raised this week by lawmakers who want to restrict companies from buying their stock.
In a tweet Tuesday, Blankfein challenged the premise that corporate stock buybacks divert resources from workers and meaningful investments. “The money doesn’t vanish,” he said. “It gets reinvested in higher growth businesses that boost the economy and jobs. Is that bad?”
Senate Minority Leader Chuck Schumer, D-N.Y., and Sen. Bernie Sanders, I-Vt., said in a New York Times op-ed on Sunday that they were going to introduce a bill that seeks to put preconditions on companies that want to buy their own stock, including that they pay workers at least $15 an hour and provide other benefits.
Last year, more than $1 trillion of buybacks were announced by large companies, including Apple‘s record-shattering $100 billion plan. Critics say buybacks reward stock-owning executives by propping up share prices instead of using company cash to build the business, and are especially jarring in light of high-profile layoffs and plant closings last year.
But the counter-argument is that buying by companies last year helped support a market that was otherwise down 6 percent.
“A company used to be encouraged to return money to shareholders when it couldn’t reinvest in itself for a good return,” Blankfein said.
Blankfein retired as chairman of Goldman at the end of December after stepping down as CEO at the end of September.