LC-22 · Corporate
Open-market stock buybacks
The company buys itself
In ordinary words
A corporation can spend billions buying its own shares, lifting earnings per share and, often, executive pay tied to the stock. Since 1982 a safe harbor has made the practice routine.
Why people call it a crime
People watch a company cut a shift, then announce a buyback, and call it looting. The securities laws usually call it a distribution to shareholders.
A scene, not a hypothetical statute
The plant closes. The press release the same quarter authorizes $5 billion in repurchases. Shareholders who sell into the bid get cash. The workers get a severance schedule. Both can be lawful.
In legal terms
SEC Rule 10b-18 provides a safe harbor from market-manipulation claims for repurchases that meet manner, timing, price, and volume conditions. The Inflation Reduction Act added a 1% excise tax on certain net repurchases after 2022. Buybacks remain lawful. Insider timing can still violate Rule 10b-5.
Boards have business-judgment discretion over capital returns. Congress taxed buybacks lightly rather than banning them.
17 C.F.R. § 240.10b-18; IRC § 4501.
Where it stops being legal
Repurchases timed to a known undisclosed event, buys outside the safe harbor that manipulate the close, and buybacks that render the company insolvent under state corporate law are the failure modes.