If a President and CEO's compensation package has stock options tied to it.... how is it fair that that same CEO can authorize share buybacks that put a floor under the price of the stock and also lower the multiple making it more attractive to institutional buyers? How does that work? What a crock.
I agree. Companies also borrow money at lower rates (Fed induced low rates) and do share buybacks. So yes, they go into more debt to do this. The thing is, there's a lot more "crock" than just share buybacks in the corporate world.
One of my favorite examples of this is AZO. 5 Billion+ in debt and yet it uses its FCF to bolster EPS Q after Q.... CEO got 10.25 Million exercising options. Must be nice.
If the stock price goes up because of the company put a floor via buybacks, then all the shareholders benefit, which is why he's compensated via options. That's the theory anyway.
This is a pretty classic principal-agent issue. Bondholders protect themselves with certain covenants. If a company can issue debt (to pay dividends) while staying within these covenants--good for them. Also remember that the CEO reports to the board and I typically the board would have the final say on authorizing share repurchases.
Just give the board stock options too! "All in favor...say Aye".... its a beautiful thing. Everybody gets a mansion.