Monday, March 24, 2014
What Are Corporations Doing With Their Retained Earnings?
Many of our politicians tell us that we need to cut corporate taxes so that they can make investments that promote economic growth and create jobs. Corporations have found ways to cut their tax burden but they have not invested in the economy. Instead they have purchasing their own stock. In fact, corporations have been the major purchasers of equities. In makes sense for top management to purchase their own stock because it drives up the value of their stock options. This is an easier way to increase executive compensation than making risky investments in new products or markets.