The 2022 CHIPS and Science Act created a huge opportunity to boost domestic production of the semiconductors that power everything from refrigerators and trains to whatever electronic device you’re reading from right now.
The Biden administration has also taken important steps to make sure these and other public investment dollars create good jobs, particularly for disadvantaged workers.
For instance, CHIPS grantees must submit plans to provide affordable, high-quality child care services for their manufacturing and construction workers. And President Joe Biden has ordered all construction firms involved in large public infrastructure projects to negotiate collective agreements with their workers.
But if you take a look at the track records of corporations in line to pocket CHIPS manufacturing subsidies, you’ll understand why some Democrats are urging the administration to do more to prevent corporate executives from misusing these funds to enrich themselves and wealthy shareholders.
A new report from the Institute for Policy Studies and Americans for Financial Reform Education Fund provides detailed data on stock buybacks and CEO pay at the first 11 corporations to sign preliminary CHIPS agreements with the Department of Commerce: Intel, TSMC, Samsung Electronics, Micron Technology, Global Foundries, Microchip Technology, Polar Semiconductor, Absolics, Entegris, BAE Systems, and Rocket Lab. These companies are in line for subsidies totaling nearly $30 billion.
What did we find? Between 2019 and 2023, these companies spent more than $41 billion on stock buybacks — enough to provide 300,000 employees a $27,541 bonus every year for five years.
Intel had the largest outlay. With the more than $30 billion the company spent on buybacks from 2019 to 2023, the giant chipmaker could’ve given each of Intel’s 124,800 employees a $48,000 bonus every year. Intel is in line to receive as much as $8.5 billion in CHIPS subsidies – the most of any firm.
Stock buybacks have come under greater scrutiny as large corporations have spent record sums on this financial maneuver to artificially boost the value of their shares — and the value of CEO stock-based pay.
In many of the high-profile labor battles of 2023, unions skewered corporate executives for blowing profits on buybacks while claiming they couldn’t afford to raise worker pay. Analysts have also documented a connection between buybacks and reduced capital investment and innovation, as well as the exacerbation of economic inequality and the racial wealth gap.
In response to public concerns, the Commerce Department announced they would give a leg up in the awarding of CHIPS subsidies to companies that agree to forgo all stock buybacks. But so far, none of the companies in line for these subsidies have publicly committed to suspend existing share repurchase plans (which currently authorize $14.3 billion in buyback spending) or to refrain from adopting new plans during the grant period.
The CHIPS law does forbid subsidy recipients from spending CHIPS funds directly on stock buybacks, but since money is fungible, this is not a strong guardrail.
In a recent letter to Commerce Secretary Gina Raimondo, Senator Elizabeth Warren, Congressional Progressive Caucus Chair Rep. Pramila Jayapal, and several other lawmakers note that the federal agency has the “statutory authority to fully ban CHIPS grant recipients from engaging in stock buybacks as a condition of award.”
Unless the administration asserts this authority, the lawmakers warn, they will “leave the door open for semiconductor companies to take millions or even billions in CHIPS grants, move some money around, and then engage in more stock buybacks.”
Our report found that CEOs with preliminary CHIPS agreements are sitting on company stock holdings worth more than $2.7 billion ($306 million on average). In other words, these executives are positioned to reap huge personal windfalls from share price pops related to continued buyback spending.
President Biden has spoken out repeatedly against wasteful stock buybacks and his economic agenda centers on an industrial policy to create good jobs and long-term prosperity, particularly for communities and workers who’ve been left behind.
Strong buyback restrictions in final CHIPS contracts would help maximize the benefits of these vital investments. Public money should serve the public good — not narrow, private interests.
Sarah Anderson directs the Global Economy Project of the Institute for Policy Studies, and is a co-editor of Inequality.org. Natalia Renta is Senior Policy Counsel, Corporate Governance and Power, for Americans for Financial Reform. This originally appeared at CommonDreams.org.
From The Progressive Populist, August 15, 2024
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