National Press Club

Ohio senator unveils proposal for payments to workers when corporations buy back their own stock

July 31, 2019 | By Lorna Aldrich | lorna2@verizon.net

Sen. Sherrod Brown, D-Ohio, speaks at a National Press Club Headliners Newsmaker July 31.

Sen. Sherrod Brown, D-Ohio, speaks at a National Press Club Headliners Newsmaker July 31.

Photo/Image: Alan Kotok

Sen. Sherrod Brown, D-Ohio, announced at a National Press Club Headlners Newsmaker July 31 a proposal for new legislation that would require a payment of $1 be paid to every worker for each $1 million dollars worth of corporations' purchases of their own stock.

Brown used the example of JP Morgan Chase Bank, which purchased $20 billion of its own stock last year that would yield a worker’s dividend of $20,000 for each worker under his proposal -- a significant boost to the average bank teller’s salary of $35,000.

“Corporate executives focus on short-term performance in the stock market ... Their main goal is to increase stock prices quarter-to-quarter. That’s how CEOs’ performances are evaluated, and they are compensated in large part with company shares,” he said.

“And increasingly, corporations juice those stock prices by repurchasing their own stock - what we call a stock buyback,” he explained.

Brown, serving his third term in the Senate, cited a study that found the greater the share of stocks in executive compensation, the more likely the company made use of stock buybacks.

The proposed legislation would also limit stock buyouts for a company, impose reporting requirements and establish punishments for noncompliance, according to material distributed by the senator’s office.

Questioned whether the legislation is likely to pass, he said it takes time to garner support for legislation, citing the examples of measures he forwarded in 2013 and 2015 to expand the Earned Income Tax Credit.

He does not have cosponsors in either the House or the Senate as of now, he said.

Asked why his proposal calls for $1 per $1 million of stock buybacks rather than a percentage of buybacks or some other measure, he said, “Much of passing legislation is making it simple in a way that the media can report it and members of Congress, with all our limitations, can understand it.”

Questioners asked if the legislation might discourage companies from going public and encourage them to cut their workforce by accelerating the trend of automation in the economy. The senator said he did not think either effect would be significant.

Another questioner, noting that pension plans and 401k retirement plans hold stock, raised the issue that curtailing stock prices by limiting buybacks would take money from workers in those plans. The senator said workers could handle the money through the dividends better than corporations.

“I didn’t come to the Senate to help corporations make more money; I came to the Senate to help workers get better pay,” he said.