What Are Corporations Doing With Their Retained US Earnings?

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This article suggests that US corporations exist primarily to boost the value of their stock price. This pleases Wall Street and it makes executive stock options more valuable. They are using their surplus capital to buy back their own stock instead of investing in new technologies. For every dollar they invest in R&D they spend 1.5 dollars on stock buy backs. They also lobby for greater government investment in R&D while they do whatever they can to avoid US taxes.

We should not expect anything else from our large multinational corporations. They are only doing what their compensation system tells them to do. The majority of their income comes from stock options. Investing in the future has become investing in short term stock price appreciation.

Advocates of free market capitalism are typically opposed to government led industrial policy. They claim that private industry should allocate resources to their best use. Our large corporations want government to make the risky investments in R&D, which dictate the future of the economy. Their actions suggest that government is better prepared to allocate resources to their best use than they are. Warren Buffet, one of America's most successful investors, does not award his stockholders with dividends or stock buy backs. He argues that he will only do that when he believes that others can make better investments with his surplus capital than he can. We need more executive like Warren Buffet running our corporations.