Quantitative analysis of US-listed corporations between 1982 and 2021

Punctuated by largescale financial crises and events, estimated annual share buyback expenditure by US-listed corporations in real terms was seen to generally trend upwards between 1982 and 2021 (Fig. 1). From approximately US$27 billion in 1982 (constant 2021 USD), the annual value of share buybacks was estimated to peak at around US$1.4 trillion in 2007 – the beginning of the Great Financial Crisis (GFC) – before plummeting to nearly US$430 billion in 2009. Estimated annual share buyback expenditure was seen to increase again until 2020, a year marked by widespread recessions triggered by the COVID-19 pandemic and related events. In the ten-year period between 2012 and 2021, the total value of share buybacks was estimated at nearly US$9.2 trillion, nearly US$1.2 trillion of which occurred in 2021. Figure 1 also shows that the contribution of share buybacks to total shareholder ‘returns’ (share buybacks and dividends combined) generally increased over the period of analysis, from approximately 10% in the early 1980s to around 50% from 2018 onwards.

Fig. 1

Estimated value of open market share buybacks and dividends made by US-listed corporations in USD billion, 1982–2021. Source: Compustat North America via Wharton Research Data Services. Values in constant 2021 USD. Estimated annual value of ‘open market’ share buybacks = value of common and preferred stock purchases made minus the calculated reduction in the net value of preferred stocks outstanding (when a positive value). Total shareholder returns = open market share buybacks + dividends (common) paid

Between 2012 and 2021, inclusive, aggregate spending on total shareholder returns (share buybacks and dividends) was approximately 92% of aggregate net income, compared to 71% between 1982 and 1991 (Fig. 2). The ratio of total shareholder ‘returns’ to capital, research, and development expenditure (a proxy for actual long-term investment), increased from an estimated 24% in 1982 to 88% in 2021, which was the highest annual percentage recorded over the period of analysis.

Fig. 2

Estimated value of total shareholder returns relative to net income, as well as capital expenditure and research and development expenditure, for US-listed corporations, 1982–2021. Source: Compustat North America via Wharton Research Data Services. Estimated annual value of ‘open market’ share buybacks = value of common and preferred stock purchases made minus the calculated reduction in the net value of preferred stocks outstanding (when a positive value). Total shareholder returns = open market share buybacks + common dividends paid

Illustrative examplesCOVID-19 vaccine manufacturers: Pfizer, BioNTech, and Moderna

“Our COVID-19 vaccine deliveries and revenues exceeded our expectations. After such an extraordinary year, we would like our shareholders to participate in our strong 2021 performance through a repurchase program of BioNTech shares.”

The two vaccines that dominated the global COVID-19 vaccine market in 2021 and early 2022 were Comirnaty, jointly developed by Pfizer and BioNTech, and mRNA-1273, developed by Moderna [71]. The origins of these two COVID-19 vaccines can be traced backed to key publicly funded innovations and large amounts of direct government funding [72]. US federal funding, for instance, played a pivotal role in the two discoveries that were fundamental to the development of the COVID-19 vaccines commercialised by Pfizer, BioNTech, and Moderna: the discovery of a target ‘spike’ protein, and the modification of RNA (the concept that inspired Moderna’s name) [72, 73]. Additionally, the US Department of Defense, through its Defense Advanced Research Projects Agency (DARPA), made a number of important high risk investments in RNA vaccine technology, including a funding award worth US$25 million for Moderna towards developing RNA vaccines against the Zika and Chikungunya viruses in 2013 [72].

During the early stages of the COVID-19 pandemic, Pfizer, BioNTech and Moderna received a considerable amount of direct government funding to support their COVID-19 vaccine development programs. Between June and September 2020, Pfizer and BioNTech received approximately US$800 million in direct funding from the European Investment Bank, Singapore’s state investment bank, and the German Federal Ministry of Education and Research [74]. Moderna reportedly received nearly US$2.5 billion in US federal funding, as part of Operation Warp Speed, to develop its COVID-19 vaccine [75]. On top of these public funds, Pfizer, BioNTech, and Moderna were promised guaranteed revenue from governments in the form of advance purchase agreements (APAs) for their vaccines, which at the time were yet to be proven fully effective. In 2020 alone, Pfizer and BioNTech entered APAs worth a total of US$17.7 billion, and Moderna entered APAs worth US$7.4 billion [74]. Research commissioned by Public Citizen in 2021 identified that, as part of these APAs, as well as subsequent purchasing agreements of COVID-19 vaccines, governments around the world had paid between 4 and 24 times the cost of vaccine production [76]. In another report published by Oxfam, it was stated that, as of mid-2021, Pfizer, BioNTech, and Moderna had charged governments as much as US$41 billion above estimated production costs [77]. The high prices set by these corporations for COVID-19 vaccines meant that many governments of Global South countries were not able to compete with the governments of Global North countries for access to the vaccines [76, 77].

In 2021 and the early parts of 2022, Pfizer, BioNTech, and Moderna generated considerable profits from their COVID-19 vaccines. By mid-2022, all three companies had announced share buyback programs to distribute some of this so-called ‘excess capital’ to shareholders.

According to data sourced from Compustat, Pfizer reported a net income of US$22 billion in 2022, a 35% increase in real terms from 2019. This surge in net income was driven to a large extent by sales of its highly profitable COVID-19 vaccine (jointly developed with BioNTech) [78,79,80]. For the first three quarters of 2022, Pfizer had reported a net income of more than US$26 billion. Along with paying out around US$6.7 billion in dividends in the first three quarters of 2022 (on top of US$8.8 billion in 2021), the company bought back US$2 billion worth of its shares in the first quarter of 2022, leaving the remaining amount of the company’s authorised share buyback program at US$3.3 billion [81, 82].

For BioNTech, its COVID-19 vaccine (jointly developed with Pfizer) drove its reported net income from a loss of US$216 million in 2019 (constant 2021 USD) to a gain of more than US$11.7 billion in 2021 and US$7.0 billion for the first three quarters of 2022 [70, 83]. BioNTech, a company founded in 2008, had never previously paid out dividends or bought back its own shares prior to 2022. Between May and December 2022, the company bought back US$1 billion worth of its shares, with plans to buy back another US$500 million starting from December [84]. BioNTech also paid out a special cash dividend of around US$475 million in the first half of 2022 [84].

Moderna, like BioNTech, reported an enormous surge in net income due to its COVID-19 vaccine, which was estimated as having a 70% pre-tax profit margin in 2021 [80, 85, 86]. This enabled Moderna to turn around a net income loss of around US$550 million (constant 2021 USD) in 2019 to a net income gain of US$12.2 billion in 2021 and US$6.9 billion during the first three quarters of 2022. Prior to the final quarter of 2021, Moderna had never bought back its own common shares. For the first three quarters of 2022, the company bought back US$2.9 billion worth of its shares as part of an authorised US$6 billion share buyback program [87]. The company did not report any dividend payments during this time.

As of early 2022, over 100 countries were calling for intellectual property (IP) rules to be lifted to improve COVID-19 vaccine equity [88]. These IP rules enable pharmaceutical corporations to generate large profits from COVID-19 vaccines, and thus it is perhaps unsurprising that many pharmaceutical corporations have been and continue to be staunchly opposed to measures such as IP waivers [88]. Pfizer, as a case in point, reportedly pressured officials in South Africa to drop the nation’s IP waiver program during months of negotiations in 2021 over a contract for the supply of COVID-19 vaccines [89]. Pfizer did pledge commitment at the 2022 World Economic Forum to provide a range of vaccines and medicines at not-for-profit prices to 45 lower income countries [90]. However, some have noted that not only is this ‘too little, too late’ to improve low vaccination rates in many lower-income countries, the initiative will cost Pfizer little while helping it build a new market and its reputation [90, 91].

The fossil fuel industry and its five largest non-state-owned corporations

“At its meeting on February 9, 2022, the Board of Directors has defined a shareholder return policy for 2022 [... including] buybacks to share the surplus cash flow from high hydrocarbon prices.”

From the world’s first United Nations Framework Convention on Climate Change’s Conference of the Parties in 1995 up until the end of 2021, the US-listed fossil fuel industry transferred nearly US$3.8 trillion (constant 2021 USD) to its shareholders. Share buybacks accounted for more than US$1 trillion worth of these shareholder ‘returns’. Expenditure on share buybacks by US-listed fossil fuel corporations was seen to peak between 2005 and 2008, with an estimated US$435 billion (constant 2021 USD) spent on share buybacks during this period (Fig. 3). Although annual expenditure declined after the Global Financial Crisis, the industry still allocates many billions of dollars towards share buybacks every year.

Fig. 3

Estimated value of share buyback expenditure and dividend payments made by US-listed fossil fuel corporations versus the annual average price of crude oil imported into the US, 1982–2021. Sources: Compustat North America (via Wharton Research Data Services) and US Energy Information Administration. Values fixed to 2021 USD. Estimated annual value of ‘open market’ share repurchases = value of common and preferred stock purchases made minus the calculated reduction in the net value of preferred stocks outstanding

Since the late 1990s, the industry’s annual expenditure on share buybacks, and to a lesser extent dividends, has somewhat correlated with crude oil prices. This is consistent with evidence that large fossil fuel corporations tend to generate large profits when global oil prices are high, as occurred during the first half of 2022 when some of the largest fossil fuel corporations generated record profits [92, 93]. Moreover, it has been recognised that the fossil fuel industry owes a considerable proportion of its profits to both its ability to externalise enormous environmental costs, as well as government subsidies [94]. For instance, a recent report published by the International Monetary Fund calculated that the environmental costs externalised by the fossil fuel industry, along with fossil fuel subsidies, reached US$5.9 trillion in 2020 alone.

Despite being explicit about the need for an energy transition in their sustainability reports, four of the world’s five largest fossil fuel corporations have allocated much more money towards their shareholders, including via share buybacks, than towards investing in renewable and low carbon energy programs in recent years (as reported) (Table 1). As a pertinent example, between 2002 and 2021, Exxon Mobil allocated an estimated US$318 billion (constant 2021 USD) towards share buybacks, along with US$243 billion in dividends, compared to around US$10 billion in research, development, and implementation of so-called ‘lower-emission’ energy solutions [95]. For 2022 and beyond, the same four corporations have made larger commitments to share buybacks and dividends than to investing in renewable and low carbon energy (as reported) (Table 1). After generating record profits, Shell, for instance, spent US$14.5 billion on share buybacks in the first three quarters of 2022 (on top of US$5.6 billion in dividends), and plans to spend another US$4 billion on share buybacks by the end of the year. In comparison, Shell aimed to invest US$3 billion in its renewables and ‘energy solutions’ business over the entire year [96, 97].

Table 1 Commitments made by the world’s five largest fossil fuel corporations (excluding state-owned corporations) to share buybacks versus investing in renewable and low carbon energyGeneral Motors and the US ‘Auto Bailout’

“From the beginning, I made it clear that I would not put any more tax dollars on the line if it meant perpetuating the bad business decisions that had led [General Motors] to seek help [from the government] in the first place […] Understand we’re making these investments not because I want to spend the American people’s tax dollars, but because I want to protect them.”

Barack Obama, then-President of the US, 2009 [69]

General Motors (GM), a US-based corporation founded in 1908, was the world’s largest producer of automobiles for a 77-year period between 1931 and 2008 [98]. After facing a sustained period of poor financial performance starting in the mid-2000s, including over US$70 billion in losses in 2007 and 2008, GM filed for the largest industrial bankruptcy in US history in 2009 [98, 99]. Shortly afterwards, the US government announced a ‘bailout’ plan to provide GM with nearly US$50 billion of taxpayers’ money, as part of the Trouble Asset Relief Program created by the US Congress during the GFC [54, 100].

GM was required to restructure – re-emerging as the so-called ‘New GM’ – and a considerable part of the US government’s bailout was converted into a large equity stake in the company [54]. When the US government sold its remaining shares in GM in 2013, the bailout had cost taxpayers around US$11 billion [101]. Workers were forced to make considerable sacrifices during the reorganisation of the ‘New GM’. In 2009, 21,000 jobs were cut; a wage freeze was put in place for remaining workers; a funding program for unemployed workers was abolished; and a ‘no-strike’ agreement was put in place for the following six years [54, 102].

Between 1986 and 2002, a 16-year period prior to the financial collapse of GM, the company spent nearly US$35 billion (constant 2021 USD) on share buybacks. As Lazonick and Hopkins (2015) explain, if GM had saved those funds and earned a relatively modest 2.5% on it, the company would have had approximately US$60 billion (constant 2021 USD) spare at the time of the GFC [54].

Between 2015 and 2018, GM spent US$12.1 billion on share buybacks, on top of US$9.9 billion on dividends (constant 2021 USD). During this period, the company’s aggregate annual net income was approximately US$26 billion (constant 2021 USD). The decision to proceed with this large share buyback program was reportedly the result of an ongoing battle with so-called shareholder ‘activists’ – in this instance, hedge funds pressuring for larger shareholder returns [54]. The hedge fund-backed leader of these ‘activists’, former Goldman Sachs banker Harry Wilson, had been part of a team of ‘Wall Street’ experts that the Obama administration hired to organise GM’s government bailout [54].

In 2018 and 2019, GM cut more than 18,000 further jobs as part of a major company restructure [103, 104]. This decision was reportedly made to save the company around US$6 billion a year, by 2020, to be invested in, inter alia, research and development for electric and driverless vehicles [105].