The Reward Work Act reins in stock buybacks by repealing a Reagan-era Securities and Exchange Commission (SEC) loophole that allows corporations to repurchase their stock on the open market.
This legislation also empowers workers by requiring public companies to allow workers to directly elect one-third of their company’s board of directors.
Representative García explained: “Stock buybacks were considered market manipulation, and therefore illegal, until Reagan-era market deregulation. Companies buy shares of their own stock to enrich shareholders instead of increasing wages or investing in better goods and services.
“Last year, companies spent US$1.2tr on buybacks as worker wages barely kept pace with inflation. It’s time we stop allowing corporate executives to make millions by buying back their own stock while workers and consumers pay the price.”
Adding to this, representative Khanna pointed out that prior to 1982, stock buybacks were considered illegal stock manipulation, but President Reagan’s Securities and Exchange Commission implemented a rule to exempt them.
He said: “Since then, we’ve seen corporations spending money on boosting their own stock at the expense of investing in innovation and their workforce, increasing wages, or lowering prices. Over the past year, Big Oil companies and other industries drove up costs for consumers while rewarding their shareholders with buybacks. It’s time to put a stop to this greed. I’m proud to join representatives García and Hoyle as a cosponsor of the Reward Work Act to repeal this rule that has only exacerbated inequality in our country.”
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Representative Hoyle further stated: “Corporate executives are skimming money off the top to put in their own pockets as opposed to investing it back in America, our communities, and their workforce. I am proud to co-lead the Reward Work Act with Representatives García and Khanna. Stock buybacks are the epitome of corporate greed.”
The Securities and Exchange Commission, in consultation with the National Labour Relations Board, will be liable to promulgate the following regulations:
- to ensure that director elections at issuing firms are fair and democratic; and
- to ensure that 1/3 of an issuer’s board of directors will be composed of employee representatives within two years of the date of enactment of this Act.