Ministers could crack down on share buybacks if they decide they are being used to inflate bosses’ pay packages.
The department for business, energy & industrial strategy has hired the consultancy PwC and Alex Edmans from the London Business School to research the motivations and effects of buybacks — where a company purchases its own shares. Its findings will be published later this year.
Share buybacks are often used as a way of returning cash to investors, but critics argue they can be used to help executives hit earnings-per-share bonus targets and to offset the dilutive effect of issuing stock options.
Business secretary Greg Clark said: “There are concerns that companies may be trying to artificially inflate executive pay by buying back their own shares.”