One in four companies in the S&P 500 index is expected to have juiced its EPS by 4% or more by buying back its own stock, according to S&P Dow Jones Indices. That’s up from one in five at the beginning of the year, The Wall Street Journal said. After a dip in the second quarter, this third-quarter pace represented the quickest series of buybacks since the recession, and the Journal reports that the pace is expected to accelerate through year-end.
The election to buy back stock from their shareholders is partly a result of the stunted recovery. Such moves return some of that excess cash to the company’s owners by making each of the returned number of shares worth a larger stake in the company, and bolstering the company’s earnings-per-share results. But even that isn’t without risk or controversy.
One risk is that CEOs won’t have as much, or enough, cash to deploy once they want to pull the trigger on more investments in the company if their industries, markets or the U.S. and global economies lean toward greater growth—which remains the consensus expectation of CEOs and economists despite an erratic few weeks.
Another factor for CEOs to consider in the buyback equation is the suspicion that one of their motives in launching such a move is to make EPS and stock prices reflect better on their individual performances; often, those metrics are included in their compensation formulas. The more secure the CEO already is in his or her job, the better idea a stock buyback might be.
Whether the worldwide economy is a glass half-empty or half-full remains a quandary of perspective for many CEOs. The consensus view of 15 U.S. chiefs in a wide variety of businesses, cited in Chief Executive’s CEO Confidence Index report, tilted toward the “half-full” view in September for the first time since before the Great Recession. But many chiefs remain reluctant to invest in that point of view given the still-erratic progress of the U.S. economy, repeated stumbling in Europe and the cooling of growth in many emerging nations.
While not without its merit, CEOs should tread cautiously with the buyback maneuver.
Chief Executive Group exists to improve the performance of U.S. CEOs, senior executives and public-company directors, helping you grow your companies, build your communities and strengthen society. Learn more at chiefexecutivegroup.com.
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1:00 - 5:00 pm
Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process
Executives expressed frustration with their current strategic planning process. Issues include:
Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns. They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning. Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process. This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented. If you are ready for a Strategic Planning tune-up, select this workshop in your registration form. The additional fee of $695 will be added to your total.
2:00 - 5:00 pm
Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations.
Limited space available.
10:30 - 5:00 pm
General’s Retreat at Hermitage Golf Course
Sponsored by UBS
General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.
The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.
