Business leaders generally present themselves as the creators of jobs, the real makers of the economy, claiming to add value to their organization, to the economy and to society. But in the US over the last few decades, through the pervasive practice of share buybacks, the incumbents of C-suite have turned themselves into takers, not makers.

That’s the thrust of “Profits Without Prosperity,” an article by William Lazonick, professor of economics at the University of Massachusetts Lowell, in the September issue of Harvard Business Review.

Instead of creating value for their firms, their shareholders and society, top executives of these firms are, through the massive use of share-buybacks, doing the opposite: they are extracting value. Although the purported goal of share buybacks is to be “friendly to shareholders,” the overall impact of share buybacks is to destroy long-term shareholder value, jobs and the economy.

Thus between 2003 and 2012, publicly-listed firms in the S&P 500 used a colossal amount of their earnings—54 percent or $2.4 trillion—to buy back their own stock. The article reveals that this wasn’t done for the most part when stock prices were low: astonishingly, most of the big purchases came when the stock price was high. Why? “Because stock-based instruments make up the majority of executives’ pay, and buybacks drive up short-term stock prices.” These firms are engaged, the article says, in “what is effectively stock-price manipulation.”

In addition to helping themselves through share buybacks, the C-suite also generated windfall benefits for other “takers” from the economy: activist shareholders. For instance, “in recent years, hedge fund activists such as David Einhorn and Carl Icahn—who played absolutely no role in [Apple’s] success over the decades—have purchased large amounts of Apple stock and then pressured the company to announce some of the largest buyback programs in history.” The transaction transferred large profits to the activists, with no gain to the real economy.

The consequences of these share buybacks are an economic, social and moral disaster: net disinvestment, loss of shareholder value, crippled capacity to innovate, destruction of jobs, exploitation of workers, runaway executive compensation, windfall gains for activist insiders, rapidly increasing inequality and sustained economic stagnation. Yet despite these obvious problems, the practice of share buybacks is now pervasive and increasing. According to Lazonick, share buybacks area now “an obsession”, even “an addiction.”