The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Wed, 08 Apr 2026 11:32:13 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png The Dangers of Buybacks: Mitigating Common Pitfalls – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 The Dangers of Buybacks: Mitigating Common Pitfalls https://corpgov.law.harvard.edu/2020/10/23/the-dangers-of-buybacks-mitigating-common-pitfalls/?utm_source=rss&utm_medium=rss&utm_campaign=the-dangers-of-buybacks-mitigating-common-pitfalls https://corpgov.law.harvard.edu/2020/10/23/the-dangers-of-buybacks-mitigating-common-pitfalls/#comments Fri, 23 Oct 2020 13:09:57 +0000 https://corpgov.law.harvard.edu/?p=133796?d=20230127152006EST Posted by Sarah Keohane Williamson, Ariel Fromer Babcock, and Allen He, FCLT Global, on Friday, October 23, 2020
Editor's Note:

Sarah Keohane Williamson is CEO, Ariel Babcock is Head of Research, and Allen He is Associate Director at FCLTGlobal. This post is based on their FCLTGlobal memorandum. Related research from the Program on Corporate Governance includes The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here); Short-Termism and Capital Flows by Jesse Fried and Charles C. Y. Wang (discussed on the Forum here); and Share Repurchases, Equity Issuances, and the Optimal Design of Executive Pay, by Jesse Fried (discussed on the Forum here).

Returning capital to shareholders is an important and legitimate goal of many corporations. Buybacks are often an effective way to distribute capital, but care must be taken to mitigate downfalls related to personal gain and enrichment, poor timing, and excess leverage.

Buybacks have experienced a meteoric rise in popularity since the turn of the twenty-first century, overtaking dividends as the preferred means to return capital to shareholders in jurisdictions like the US. In 2019 alone, corporations spent more than USD 1.2 trillion globally on buybacks.

But the rise of buybacks has been riddled with controversy. Academics, practitioners, and politicians alike have maligned the use of buybacks, taking issue with their potential contribution to income inequality, underinvestment in innovation, and use for personal enrichment. Buybacks and their implications for the long-term strength of the economy are controversial but not well understood. A deeper look at the topic reveals the following:

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