NO BUYBACKS GUIDANCE IN CORPORATE GOVERNANCE PRINCIPLES

Download This Article

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Abstract

13 high profile CEOs of U.S. companies secretly worked for one year to develop corporate governance principles that would serve as a future pathway. They advocated their resulting document as being detailed and tough-minded with commonsense recommendations and guidelines about the roles and responsibilities of boards, companies, and shareholders. However, these corporate governance principles did not provide any specific guidance or perspective on the use of common share buybacks to improve earnings per share, which has become a popular form of earnings management by U.S. public companies. This paper analyzes the buyback strategy of these CEOs’ own public companies plus a sample of their major competitors. For these well-known major U.S. companies, the common stock buyback strategy to improve the profitability performance of net income growth to a larger EPS growth occurred 61% of the time for annual growth periods and 100% of the time for the four-year growth period. Accordingly, this paper recommends buybacks guidance for corporate governance, consistent with public reporting and management compensation guidelines.

Keywords: Share Buybacks, Repurchases, Corporate Governance, EPS Growth

Received: 10.08.2017

Accepted: 20.09.2017

How to cite this paper: Grove, H., & Clouse, M. (2017). No Buybacks Guidance in Corporate Governance Principles. Corporate Governance and Organizational Behavior Review, 1(1), 7-12. https://doi.org/10.22495/cgobr_v1_i1_p1