“It’s just wrong for big corporations to reward the wealthy or top executives with more stock buybacks, while closing facilities and laying off workers”

NEW YORK/BOSTON (Reuters) – “U.S. companies laying off workers in response to the coronavirus pandemic but still paying dividends and buying back shares are drawing criticism from labor unions, pension fund advisers, lawmakers and corporate governance experts.

“While most U.S. companies are scaling back payouts after a decade in which the amount of money paid to investors through buybacks and dividends more than tripled, some are maintaining their policies despite the economic pain.

“Royal Caribbean Cruises Ltd (RCL.N), Halliburton Co (HAL.N), General Motors Co (GM.N) and McDonald’s Corp (MCD.N) have all laid off staff, cut their hours, or slashed salaries while maintaining payouts, according to a Reuters review of regulatory filings, company announcements and company officials.

“‘This is the time for large companies to try to help, for systemic reasons, to keep things flowing,’ said Ken Bertsch, executive director of the Council of Institutional Investors. The council’s members include public pension funds and endowments that manage assets worth about $4 trillion…

“While there has been criticism of companies maintaining investor payouts, only those receiving financial support from the U.S. government under a $2.3 trillion stimulus package are obliged to suspend share buybacks.

“Layoffs contributed to U.S. unemployment skyrocketing last month. Jobless claims topped 6.6 million in the week ended March 28 - double the record set the prior week and far above the previous record of 695,000 set in 1982. Companies say job cuts are necessary to offset a plunge in revenue but their critics say they should consider turning off the spigots to shareholders before letting employees go.

“‘If companies are paying dividends and doing buybacks, they do not have to lay off workers,’ said William Lazonick, a corporate governance expert at the University of Massachusetts…

“General Motors has halted normal production in North America and temporarily reduced cash pay for salaried workers by 20%. It paid its first-quarter dividend on March 20 and has a month before declaring its next dividend, a spokeswoman said, adding that GM would assess economic conditions before deciding.

“‘Our focus in the near term is to protect the health of our employees and customers, ensure we have ample liquidity for a very wide range of scenarios, and implement austerity measures to preserve cash,’ spokeswoman Lauren Langille said…

“Some of the companies laying off workers while still paying out shareholders, such as General Motors, signed an initiative last year from the Business Roundtable, a group of chief executives, pledging to make business decisions in the interest of employees and other stakeholders, not just shareholders.

“Large asset managers such as BlackRock and Vanguard have cited managing ‘human capital’ as a priority for companies in which they invest. Yet they have been reluctant to publicly press companies to avoid layoffs during the crisis…

“‘Profits should be shared with the workers who actually create them,’ U.S. Senator Tammy Baldwin, a long-standing critic of share buybacks, told Reuters in an email. ‘It’s just wrong for big corporations to reward the wealthy or top executives with more stock buybacks, while closing facilities and laying off workers.’”

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