Macron is right and wrong on share buybacks

French President Macron attends the National Roundtable on Diplomacy in Paris
French President Emmanuel Macron arrives to attend the National Roundtable on Diplomacy at the foreign ministry in Paris, March 16, 2023. Michel Euler/Pool via REUTERS

LONDON, March 23 (Reuters Breakingviews) - Emmanuel Macron dislikes the “cynicism” of large profitable companies engaging in massive share buyback programmes. The French president has a point that there are better ways for companies to spend their profits than to reduce their share count. But his proposal to force corporates to pay a one-time 2023 bonus to workers is slightly cynical as well.

Macron’s gambit is a political ploy from a president still reeling from months of strikes and street protests against his pension reform. But his target merits scrutiny. Share buybacks in Europe’s largest 11 markets nearly doubled last year to 161 billion euros, according to a report by BNP Paribas (BNPP.PA), which itself is spending some 5 billion euros - or half its net profit - to acquire its own stock. The French government has been trying to force business to agree on a better repartition of corporate added value between profits and wages. And from an economic viewpoint, money spent cuddling shareholders would be better spent on investment and growth.

That said, the scope for one country to regulate share buybacks in isolation – and to stop companies just paying out special dividends instead - is dubious. If France wants its companies to invest more, it can tinker with tax incentives to encourage them to do so over the long-term. As it is, Macron’s message seems to be that buybacks deemed “cynical” this year will be absolutely fine in 2024. (By Pierre Briançon)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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