Report: Home Depot spent billions on its own shares instead of raising pay

Home Depot ranks in the bottom 100 companies in the S&P 500 index for median pay. But it ranks near the top of those corporations in buying back its own stock shares, billions that instead could have been spent improving wages, according to a report from a Washington, D.C., think tank.

Lowe’s and Home Depot ranked No. 1 and No. 2, respectively, on stock buybacks from 2019 to 2023, money that could have more than doubled the annual pay for a median worker at the two huge home improvement retailers, said the left-of-center Institute for Policy Studies, which advocates overhauling CEO compensation and narrowing the pay gap between workers and top executives.

The 30th annual “Executive Excess” report examined the compensation practices of the 100 corporations with the lowest median wages among public companies in the S&P 500.

From 2019 to 2023, North Carolina-based Lowe’s spent $42.6 billion on buybacks and Vinings-based Home Depot used $37.2 billion on share repurchases, said Sarah Anderson, director of the IPS Global Economy Project and the author of the report.

Third on the list is Walmart, which spent nearly $31 billion. In all, the 100 companies examined spent more than half-a-trillion dollars on stock buybacks from 2019 to 2023, the report said.

Anderson called the amounts “staggering.”

A spokesman for Home Depot defended stock buybacks as an appropriate use of money that is not needed to run ongoing business operations or to invest in growth.

“First and foremost, we invest in the business and have done so at about 2% of sales on an annual basis,” he said. “After investing in the business, we plan to pay the dividend, and it is our intent to return any excess cash to shareholders in the form of share repurchases.”

Lowe’s did not immediately respond to a request for comment.

Supporters say buybacks, which were not permitted until a 1982 rule change by the Securities and Exchange Commission, can boost stock prices while providing additional rewards for the company’s shareholders.

They are “an excellent way to generate tax-advantaged returns for stockholders,” according to Bankrate, an online financial comparison site. “Properly executed stock repurchases are one of the best and lowest-risk ways to create value for shareholders.”

Corporate critics, such as the authors of a 2020 article in Harvard Business Review, say the buybacks don’t do anything to improve a company’s production or efficiency. The buyback dollars also could be spent on research and development to create new products that could boost sales, or to help fund employee retirement plans.

“These distributions to shareholders, which generally come on top of dividends, disrupt the growth dynamic that links the productivity and pay of the labor force,” the authors wrote. “The results are increased income inequity, employment instability and anemic productivity.”

Critics also have long argued that stock buybacks are a backhanded way to enrich executives, whose compensation often involves stock options.

Home Depot, which has about 465,000 employees, is the largest Georgia-based company by sales and one of the largest employers. The chain has 2,340 stores, including 90 in Georgia.

The Home Depot buybacks were “enough to give each of Home Depot’s 463,100 employees five annual $16,071 bonuses,” the IPS report said. Lowe’s buybacks were “enough to have given each of the chain’s 285,000 employees an annual $29,865 bonus for five years.”

According to financial filings by the companies, the median annual pay for a Home Depot employee is $35,131 a year, and the median pay for a Lowe’s employee is $32,626.

In the past year, Home Depot’s revenues were about $152 billion, and sales for Lowe’s were about $84 billion.

Home Depot said it put stock repurchases “on pause” this spring after its $18 billion acquisition of SRS Distribution.

From 2019 to the end of 2023, Home Depot stock more than doubled in value, from $170 a share to $346. The stock closed Thursday at $367.06.

From 2019 to the end of 2023, Lowe’s stock also more than doubled in value, from $93 a share to $223. The stock closed Thursday at $246.77.