Blogs

Warren, Casten Urge BAE Systems to Refrain from Stock Buybacks After Receiving CHIPS Act Funds | U.S. Senator Elizabeth Warren of Massachusetts

February 07, 2024

Warren, Casten Urge BAE Systems to Refrain from Stock Buybacks After Receiving CHIPS Act Funds

“BAE Systems’ track record of extensive stock buyback programs raises serious concerns about its willingness to forgo buybacks at the expense of the capital needed for the investments expected of CHIPS funding recipients.”

“BAE Systems has made no public indication that it plans to suspend its most recent round of stock buybacks after receiving CHIPS Act funding, which would seem to run counter to the intent of the law.”

Text of Letter (pdf) 

Washington, D.C. – Senator Elizabeth Warren (D-Mass.) and Rep. Sean Casten (D-Ill) sent a letter to the President and CEO of BAE Systems, Inc. (“BAE Systems,” “BAE”) regarding the preliminary agreement between BAE Systems and the Department of Commerce to award $35 million in CHIPS and Science Act federal grant funds to the company. This is the first CHIPS grant awarded by Commerce. In the letter, the lawmakers express concern over BAE Systems’ history of engaging in massive stock buyback schemes and urge BAE to refrain from engaging in stock buybacks for the duration of its CHIPS Act grant. The lawmakers also request answers about the commitments the company has made to protect taxpayer funds from diversion and misuse.

“We are concerned by BAE Systems’ history of engaging in massive stock buyback schemes that divert capital away from important investments. This history of buybacks raises serious concerns about BAE Systems’ intent to comply with the requirements of the CHIPS incentive programs. We urge BAE Systems to hew to the spirit of the law as passed by Congress, as well as guidance issued by Commerce, and refrain from engaging in stock buybacks for the duration of its CHIPS Act grant,” wrote Senator Warren. 

The CHIPS and Science Act contains several provisions delineating exactly how award recipients can use program funds, including directing the Secretary of Commerce to “determine that the (CHIPS) project to which the application relates is in the economic and national security interests of the United States.” The Department of Commerce reiterated this requirement by announcing it would make certain that awards were not used as “a subsidy for companies to make them more profitable or enable them to have more cash for stock buybacks or to pad their bottom line(s).”  Section 102(g) of the CHIPS Act explicitly forbids companies from using CHIPS funding to engage in stock buybacks. However, Commerce did not utilize the full extent of its authority under the law as outlined in a letter the lawmakers sent in February 2023.

In the ten years prior to passage of the CHIPS and Science Act, BAE Systems paid out nearly $9.4 billion to shareholders in dividends and stock buybacks. In June 2023, the company commenced the third round of a nearly $2 billion stock buyback program while simultaneously authorizing another roughly $2 billion in stock buybacks over the next three years – squarely within the period of its CHIPS Act award. BAE Systems has made no public indication that it plans to suspend its most recent round of stock buybacks after receiving CHIPS Act funding, which would seem to run counter to the intent of the law. 

“Expanding domestic capacity for chip manufacturing is critical to U.S. national security. Congress placed explicit guardrails on the use of CHIPS and Science Act incentives to ensure recipients use those funds for their intended purpose. In light of BAE Systems’ near-constant, decade-long stream of stock buyback programs raises, it is imperative the public know what commitments the company has made to protect taxpayer funds from diversion and misuse,” concluded the lawmakers. 

Senator Warren has led fights to ensure CHIPS funding is distributed equitably and taxpayer dollars are protected from misuse: 

  • On January 10, 2024, Senator Warren and U.S. Representative Pramila Jayapal (D-Wash.) sent a letter to Secretary of Commerce Gina Raimondo, expressing concerns about the Department of Commerce’s (Commerce) reliance on a small team of Wall Street financiers to help allocate $39 billion in CHIPS and Science Act taxpayer-funded manufacturing and R&D subsidies.
  • In February 2023, Senators Warren, Tammy Baldwin (D-Wisc.), Bernie Sanders (I-Vt.), Ed Markey (D-Mass.), and Representatives Sean Casten (D-Ill.), Bill Foster (D-Ill.), Jayapal, and Jamaal Bowman (D-N.Y.) sent a letter to Michael Schmidt, Director of the CHIPS Program Office, calling on Commerce to use its full authority to prevent funds from CHIPS and Science Act from being used to directly or indirectly subsidize corporate stock buybacks.
  • In October 2022, Senators Warren, Baldwin, Chris Van Hollen (D-Md.) and Representatives Casten, Bowman, Jayapal, and Foster sent a letter to Secretary Raimondo, urging the Commerce Department to strengthen and enforce critical protections against the abuse of funds provided CHIPS Act for stock buybacks and promising continued Congressional oversight over the Department’s implementation of its commitments. 
  • In September 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren raised concerns about the need to protect CHIPS Act funds from being used by semiconductor companies to line the pockets of corporate executives instead of investing in strengthening supply chains, creating good union jobs, and bringing down prices for consumers. 
  • In June 2022, Senators Warren and Sanders and Representative Casten sent a letter to congressional conferees stressing the importance of strong guardrails to ensure that funding for the CHIPS Act is invested in workers and communities as intended, instead of enriching corporate executives.

###






Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button