‘Stop Walmart Act’ Would Prevent Stock Buybacks Unless Companies Pay $15 an Hour

What’s the story?

Targeting America’s largest employer and other major retailers, Sen. Bernie Sanders (I-VT) and Rep. Ro Khanna (D-CA) have introduced the Stop Walmart Act, a bill that would prohibit large employers from buying back stock unless they:

•  Pay all employees at least $15 an hour.
• Allow employees to earn up to 7 days of paid sick leave.
• Ensure that CEO compensation is no more than 150 times the median pay of all employees.

What is stock buyback?

• A company – say Walmart – would pay shareholders for the market value of their stock shares. This, in turns, reduces the number of open shares in the market.
• As Investopedia explained, “because a company can't act as its own shareholder, repurchased shares are absorbed by the company, and the number of outstanding shares on the market is reduced. When this happens, the relative ownership stake of each investor increases because there are fewer shares, or claims, on the earnings of the company.”

Why would a company buy back their shares?

• To make money. Companies usually announce a buyback when they believe their shares are undervalued—just like anyone, they’d prefer to buy low and sell high.
• To increase in the value of share by reducing the supply of share.
• To reduce the amount of shares in an open market to help prevent a hostile takeover.
• To cover up poor performance.

What are both sides saying about the Stop Walmart Act?

• "Most Walmart retail workers are working for horrendously low wages with minimal benefits," Sen. Sanders said.

"Amazon did the right thing by raising their minimum wage to $15 an hour. Walmart can and must do the same."

• Critics of the bill say that preventing stock buybacks also prevents investors from injecting the money they made off the repurchase back into the economy.
• “Preventing investors from buying back shares would essentially trap capital within the very firms that don't need it, which will hurt wages and productivity in the long run,” Samuel Hammond, director of poverty and welfare policy at the libertarian-leaning Niskanen Center, told the Washington Post.

“This is the latest in the worrying trend of politicians threatening specific companies with ruinous regulations in order to win short term concessions.”

• Walmart also said the company has been increasing wages over the last three years.
• “Our big focus for our company is making it easy for people to get in the front door for a job and empowering them to grow as fast as their skill will take them,” said Walmart spokesman Kory Lundberg.

“We have been very deliberate about our job offerings, and we will continue listening to our people and investing in the training, benefits and wages that they tell us are important.”

What do you think?

Do you want your reps to support the Stop Walmart Act? Take action above, then share your thoughts below.

—Josh Herman

(Photo Credit: iStockphoto.com / Wolterk)