| FOR IMMEDIATE RELEASE Contact: Steven D. Smith Steven.Smith@mail.house.gov February 25, 2019 |
| Rep. Hill Letter in the New York Times: Government Shouldn't Interfere in Stock Buybacks |
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WASHINGTON D.C. — Congressman French Hill (AR-02) penned a letter to the New York Times in response to a recently published op-ed by Senators Chuck Schumer (D-NY) and Bernie Sanders (I-VT) calling for the limitation of corporate stock buybacks. Rep. Hill's full letter to the New York Times is copied below: Letter to the Editor The New York Times Congressman French Hill I was disappointed to read the op-ed from Senators Schumer and Sanders, calling for the limitation of corporate stock buybacks. I was even more disheartened when just this past week, I learned Senator Marco Rubio also announced a similar plan. For some reason, these Senators believe they know how best to allocate capital across our $20 trillion U.S. economy. Limiting stock buybacks disincentivizes aspiring entrepreneurs to go public and hinders individual shareholders and retirees from building equity. Management and boards of directors for public companies have a fiduciary obligation to maximize long-term appreciation for their shareholders. This fiduciary stewardship requires a thorough knowledge of the company’s growth, capital needs, and stock valuation. Policymakers interfering with this fiduciary obligation undermines the free market which could lead to unintended consequences for the investor. To quote investment maven, Warren Buffett, chief executive at Berkshire Hathaway, stock buybacks are "sensible for a company when it shares sell at a meaningful discount to conservatively calculate intrinsic value… [they] are the surest way to use funds intelligently: it's hard to go wrong when you're buying dollar bills for $0.80 or less." Buffett reminds management, though, "never forget: in repurchase decisions, price is all important. Value is destroyed when purchases are made above intrinsic value." Management that miscalculates this all-important Buffett maxim do so at their own peril. As shareholder values fall, stock returns to investors will be noncompetitive and the spotlight will shine on the leaders of the company that made poor capital allocation decisions. Government policy has no business in meddling with capital allocation. Boards should take full responsibility for the decisions that impact their shareholders. |
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### To learn more about Congressman French Hill, please visit: Hill.House.Gov |
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