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Share repurchases: What influence on exec comp?

Share repurchases: What influence on exec comp?Zoom inDownload PDF

Corporate America has increasingly relied on share repurchases to fuel earnings per share (EPS) growth in recent years. A study by Reuters found that nearly 60% of nonfinancial, publicly traded companies have bought back shares in the last five years, and share repurchases and dividends exceeded capital spending in 2014.

Critics suggest that the boom in repurchases has been driven by executives seeking to “game” incentives — inflating short-term results to line their pockets. With this in mind, directors need to ask: how should buybacks influence incentives, and compensation decision making? We offer four principles to help directors answer this question.

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