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Humana engages in controversial 'buyback' trend

Experts concerned that share repurchasing threatens markets

An "unprecedented buyback binge" among corporations--including health insurer Humana--has stirred criticism that CEOs are using stock repurchases to pad their paychecks at the expense of their companies' long-term health, according to Reuters.

Humana told investors last year that it would make a $500 million share repurchase after the company reported lower-than-expected quarterly earnings in late 2014. Since that allowed Humana to reach its earnings-per-share target, CEO Bruce Broussard earned a $1.68 million bonus for 2014, the article says.

Humana would not comment as to whether it adjusted targets to account for its buyback last year, but experts told Reuters the company would not have hit the target without the $500 million repurchase.

Buybacks have recently come under scrutiny, with some saying that they hurt financial competitiveness. By providing a lift to a stock's price, buybacks can increase total shareholder return to target levels, which results in more rewards for executives, as well as increasing the value of the company through stock that it already owns, the article says.

Roy Dunbar, a member of the Humana board's compensation committee, told the news agency that accelerated repurchases allow companies to "signal a higher degree of confidence in something shareholders care a great deal about."

In July, Aetna announced that it would acquire Humana in a deal that, at the time, valued Humana at $37 billion, and many experts has since expressed concern about the anticompetitive implications of such a large combined company. Broussard also stands to receive a golden parachute of around $26.1 million if he loses his position as a result of the merger, FierceHealthPayer has reported.

To learn more:
- read the Reuters article

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