Financial engineering is replacing real
engineering by Satyajit Das
“In reality, share
buybacks, etc., boost the stock price by increasing EPS. In the US, buybacks
have added around $2 a share to earnings on the S&P 500 index. Given that
the firm’s underlying operating performance is unaffected, it is merely
financial engineering that does not alter the company’s value. A primary
motivation is enhancing the remuneration of senior managers, where stocks and
options may constitute as much as 80 percent of the total compensation.”