IN THE EARLY 1980s, a group of menacing outsiders arrived at the gates of American corporations. The “raiders,” as these outsiders were called, were crude in method and purpose. After buying up controlling shares in a corporation, they aimed to extract a quick profit by dethroning its “underperforming” CEO and selling off its assets. Managers— many of whom, to be fair, had grown complacent— rushed to protect their institutions, crafting new defensive measures and lodging appeals in state courts. In the end, the raiders were driven off and their moneyman, Michael Milken, was thrown in prison. Thus ended a colorful chapter in American business history.
Or so it seemed. Today, another effort is under way to raid corporate assets at the expense of employees, investors, and taxpayers. But this time, the attack isn’t coming from the outside. It’s coming from inside the citadel, perpetrated by the very chieftains who are supposed to protect the place. And it’s happening under the most innocuous of names: stock buybacks.
You’ve seen the phrase. It glazes the eyes, numbs the soul, makes you wonder what’s for dinner. The practice sounds deeply normal, like the regularly scheduled maintenance on your car.
It is anything but normal. Before the 1980s, corporations rarely repurchased shares of their own stock. When they started to, it was typically a defensive move intended to fend off raiders, who were