Critics of stock buybacks allege that the practice is a form of market manipulation that allows insiders to unfairly profit and sacrifices long-term growth. The authors conducted a large-sample study of stock buybacks over the past 30 years in the U.S. and did not find a correlation between share repurchases and price manipulation, return reversals, excess CEO compensation, or underinvestment. A ban could, however, impose costs on U.S. public companies and other stakeholders.

Each year most public companies issue reports describing the pay packages of their CEOs. In them compensation committees attempt to explain the rationale behind the pay figures to the shareholders, who often must vote to approve them. The issue is, in their reports many committees adjust performance numbers in obscure and inappropriate ways that lead to overly generous CEO pay. And they do so using nonstandard criteria that are difficult for even sophisticated institutional investors to decode. In this article, the former executive chairman of MFS Investment Management and an MIT professor of accounting and finance sort through the reports' fine print and expose practices that stack the deck in CEOs' favor: Adjusting earnings to be 100% higher than GAAP income. Paying out 80% of an incentive award for bottom-quartile performance. Choosing "peer companies" that are not comparable in size or in industry. And more. Shareholders should be more skeptical, say the authors, and comp reports must start providing much clearer explanations. But what's needed most are new standards for compensation design and reporting.