Oil Companies Buy Back Stocks – Why You Should Be Angry

The other day Chevron announced that they were planning to buy back nearly $15 billion worth of their stock, a move which is great for current stock holders. For those of you who are unaware, a stock buy back program essentially drives the price of a company’s stock higher due to the fact the company is taking a certain percentage of the available stock out of circulation.

Chevron isn’t the only oil company to have recently approved a buy back program, as ExxonMobil and ConocoPhillips have similar programs. Unfortunately for these companies, this time there might not be safety in numbers.

It appears that these share buy back programs have drawn the ire of many people who feel that the money used to purchase company stock (and thus rewarding the shareholders) would be much better served going towards either building new refineries or alternative fuel research and development.

While I know and understand that publicly traded companies have an obligation to maximize shareholder wealth (which is what a stock buy back does) it would be nice to see these multi-billion dollar companies be willing to overlook increasing shareholder value by a couple of percentage points and do what’s best for their customers.

Considering we’re in the midst of ever increasing energy costs as well as facing a global climate crisis brought on by our reliance on fossil fuels, I think it’s pretty clear that the best investment Chevron, ExxonMobil and ConocoPhillips could have made was to pour the stock buy back money into research and development of cheap and renewable energy sources.

While I don’t think $15 billion is enough to come up with a viable alternative fuel, it’s certainly a pretty good start.

In the meantime, I guess we’ll just have to sit back and hope that the shareholders who are reaping the financial benefits of the buy back reinvest their profits in companies that care about the greater good, not just their price per share.

Comments

  1. Unfortunately, if a shareholder can present a case that a company did anything to reduce share price, or even failed to do something that would increase share price, he/she can and likely will sue. At best, this will send a huge pile of money to attorneys.

  2. Wouldn’t it be easy to argue that if the company reinvested the profits into positioning itself to be a leader in renewable energy that it would be putting the shareholder in a much more favorable long term position?

  3. That would be that argument all right, but even if valid, and even if the judge/jury agreed, the (literally) millions of dollars poured down the rat hole of legal fees, etc. can never be recovered.

    We are hugely handicapped economically by the requirement for production of high quarterly profits. This ties one fist behind our back, so to speak. Then our legal system wherein there’s literally nothing to lose by suing, cuts off the remaining arm and kneecaps both legs.

  4. It would be nice if baseless claims never saw the light of day…

  5. “Loser pays” is the answer. It will never happen though because every branch of every level of government is in the pocket of the trial lawyers’ lobby. Many occupants of these government positions ARE attorneys.

    Umm…. is this rant a little of topic?

  6. Sigh… “off topic?”

  7. It’s unfortunate that it appears our government is putty in the hands of lobby groups and corporations.

  8. It amazes me that there’s always someone looking out for the big companies. Let us not forget what some big companies **cough, enron, cough** got away with. Yes, I wish everyone and corporation had ethical and moral standards. Unfortunately that is not the case! With that in minde if government intervention is necessary then it should be done. Before you go and utter “socialist” think back to some of the benefits of law… airbags, seatbelts etc.

  9. Lets not forget that corporations are not just
    some uncaring evil monster.

    They are composed of people, employees, stockholders and yes, management. And some might even be your neighbors.

    Why should a corporation not serve its own self
    interests as long as they are legal?

    As others have pointed out here, these organizations need to serve the interests of
    its owners.

    I know its very popular to bash ‘those evil corporations’ but this is just a political
    division tactic.

    Those that want to tax those that make money
    in our economy only serve to dislocate the
    economy and punish the end user who they profess to want to help.

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