With record sums of cash on the balance sheets of U.S. companies, there are questions about the best way to use this liquidity. Activists often pressure companies to increase share repurchases, increase dividends, restructure, spin-off a division or even sell the company. And activists are often successful in achieving their goals.
PwC’s Governance Insights Center recently released a report titled “Is cash burning a hole in your pocket? Thinking through share repurchases and dividends,” which cautions directors and shareholders to make informed decisions about their capital allocation strategies. In one such caution, the authors note, “Directors need to be prepared to pose tough questions to executives about the virtues of long and short-term capital allocation strategies.”
The report addresses:
- Factors that attract companies to share repurchases and dividends
- Short and long-term concerns including executive compensation and tax
- Effects on performance metrics such as earnings per share and return ratios
- Key director and investor considerations