Question

There is no hard rule that the company should use the funds spend on share buybacks on the growth of the company and the benefits of workers. The company is obligated to invest in growth and employee benefits but this obligation does not state that the funds from share buybacks should be used. The company can invest in both; share buyback and growth. Share buybacks also benefit the executives by enhancing their stock options. The companies buying back their shares should not excessively invest in the buyback rather use the funds in different opportunities and operations in addition to the buyback practice.

1) Why is a company obligated to invest in employee benefits?

Answer 1

Answer)

Human Resources are crucial for growth and development of an organisation. An organisation with high employee rotation will lose in both ways i.e in form of training costs and also in form of delays in production of goods or providing services due to lack of efficiency in new employees as compared to experienced which may lead to loss of clients. Moreover, talented employees see employees benefits along with just salary. Hence, a company is obligated to invest in employee benefits to retain expertise and attract new talent.