Proposed legislation could hurt Apple executives but help other employees

Proposed legislation could hurt Apple executives but help other employees
Legislation proposed by Senate Democratic leader Charles Schumer of New York and Sen. Bernie Sanders of Vermont could negatively impact the valuation of tech stocks including Apple. The pair laid out their plan in The New York Times last Sunday (via CNBC), under which publicly traded companies like Apple would be prohibited from buying back their own shares unless they pay workers a minimum of $15 per hour, give them paid time off, and offer employees health benefits.

Stock buybacks are done by corporations to reduce the number of shares outstanding. Doing this increases the earnings per share (EPS) figure that is used in calculating a stock's price-to-earnings ratio (PE). This number is a quick and dirty way to see if a stock is cheap or dear; the higher the EPS part of the equation, the cheaper a stock looks to value investors. So yes, buying back shares can pump up the value of a company. Some firms buyback their shares in lieu of paying a dividend to holders.

Thanks to the tax cut that went through last year, companies bought back more than $1 trillion of their own stock during 2018. That was a record for any year. But the average Joe really doesn't benefit from this because, as the Times points out, 85% of stock valuation is in the hands of the wealthiest 10% of Americans. Not surprisingly, high-paid corporate executives, many of whom receive bonuses based on stock price performance, are in line to clean up from stock buybacks.

The company that has spent the most money buying back shares over the last ten years is Apple. The latter spent $239.4 billion over the last decade purchasing its own stock. Microsoft is number three, buying back $94.3 billion during the same 10 years. Apple dominates the list of the 10 largest buybacks announced with six appearances. Microsoft shows up on the list twice.


Apple CEO Tim Cook is one who has benefited from Apple's buybacks. For example, last August the executive received 560,000 shares of Apple that is currently valued at $97 million. The number of shares that Cook was given is based on the performance of Apple's stock price compared with other companies in the S&P 500 over a specific period. While we will never know with certainty how much of the rise in Apple's stock price can be attributed to the buybacks, they most certainly helped Cook and other Apple executives earn huge paydays.

While the legislation proposed by Senator Schumer and Sanders won't stop corporate buybacks, it does make sure that companies are sharing their wealth by paying employees more money and giving them greater health benefits. Whether such legislation passes the Senate and House and is signed by the president is another story.

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9 Comments

1. p51d007

Posts: 700; Member since: Nov 24, 2013

LOL, GOOD LUCK! Name ONE thing the federal government does, that works? Keep your stinking noses out of business. These politicians BOTH demos & repubs don't know the first thing about running a business since most have never had a real job outside of government!

3. Finalflash

Posts: 4062; Member since: Jul 23, 2013

Yea, someone listen to this keyboard warrior on iPA comments. He has experience running many mom's basement based businesses. He has had real jobs outside of government, namely with household chores or else his fortnite and gamestation get taken away.

8. Penny

Posts: 1844; Member since: Feb 04, 2011

Do we really think that it is desirable or even viable for all employees to be given benefits, PTO, etc? What about high schoolers looking to work part time? What about students doing temporary jobs until the next semester starts? If every position is going to be a full time position with benefits and a raised minimum salary, then the competition for those jobs is going to increase. People like recent university grads are going to flock to those retail type jobs more than they do now. High schoolers, part timers, and other lesser qualified individuals will be out of those jobs and will no longer get that experience or income. Are we saying that there's no place in the economy for lower paying jobs without benefits? Because I fear we'd be stratifying the economy into even more disparate groups in that case, especially on the low end.

9. Penny

Posts: 1844; Member since: Feb 04, 2011

Out of curiosity, what does "productive investment of corporate capital" mean to you?

5. dimas

Posts: 3286; Member since: Jul 22, 2014

@p51d007 so you prefer shady business tricks than have laws that will prevent those things to happen? Either your drunk or crazy.

7. cncrim

Posts: 1571; Member since: Aug 15, 2011

So you don't think buy back is good? when the money can pay their own employee with higher wage?

2. Leo_MC

Posts: 6618; Member since: Dec 02, 2011

Instead of buying their own stock on NYSE or NASDAQ, companies will buy them from... JEG, HKSE or Euronext, through subsidiaries.

4. sinfulta

Posts: 279; Member since: Dec 11, 2008

I don't see why this is a problem. Even in some of the lowest paid apple stores in the country the employees are starting off making more than $15/hr. My cousin started at Apple in the DFW market about half a year ago (Which is low paying btw. Minimum wage here is $7.25/hr) and they started her at $16.50/hr. She just got moved to another position and is now making just over $18/hr. So I don't see how this will be a problem for Apple. She get's benefits, sick time etc and she's part time. There is probably a few markets that pay a smidge less. But my guess is everyone is making $15/hr minimum nationwide.

6. rossy

Posts: 27; Member since: Aug 23, 2013

May not be a problem for Apple or Microsoft but it does not end with them and it does not end at $15/hr. Where do these politicians who suck at their job get chutzpah to tell others how to do theirs. What's worse, these government leaches then use the power of federal government to enforce their stupid ideas.

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