SA firms are major players in the global buyback mania, which, some say, is fed by executive greed. Nicolene Wesson is a changed woman. Gone is the haunted look that has clouded her face for much of the past five years. Wesson, an academic at the University of Stellenbosch Business School, has recently emerged from the lower reaches of the accounting world: the parts that rarely see the light of day; the parts that are rarely subjected to more than the fleeting eye of a halfway interested third party.Last month, Wesson submitted her PhD thesis on one of the most important but under-researched activities in the local investment community. After trawling through thousands of annual reports, Wesson was able to establish that in the 10 years to end-2009, South African companies spent almost R100-billion of their limited cash resources buying back their own shares. This is significantly ahead of any estimates that have been made to date.The big spenders among the 227 companies targeted by Wesson are Sasol (R16-billion repurchased), Telkom (R6.5-billion), Netcare (R5.5-billion), Remgro (R5.1-billion), Aveng (R4.2-billion) and Bidvest (R4-billion).The really big hitters are the London-listed companies such as Anglo American (which undertook a disastrous buyback programme in 2006), BAT and BHP Billiton. These companies, which are required by London rules to disclose buybacks within 24 hours, were excluded from Wesson's research. Also excluded were mining companies and financials.Wesson's research reveals that the pace at which companies are prepared to dish out money to buy back their own shares is picking up dramatically. In the 10 years covered by the research, money spent on repurchasing shares increased from R2.7-billion in 2000 to R26-billion in 2009.Given that heavy-hitters such as BAT and Anglo American are not included in Wesson's figures, and given evidence of the spreading use of buybacks, the full repurchase figure for JSE companies could be closer to R50-billion a year. Amazingly, South African shareholders have approved, without question, the resolutions needed for companies to repurchase all these shares.In most cases, excluding spectacular failures such as Anglo American's buyback and Telkom's, repurchasing shares helps to lift the share price which benefits the remaining shareholders. This is why shareholders give their uncritical support.The splurge of buybacks questions the traditional role of stock exchanges, which has been to provide companies with funds to invest. Adding the repurchases to the R247-billion of dividends paid out to shareholders over the 10 years of Wesson's research suggests JSE-listed companies pump out more money to investors than they receive from them. In 2009, less than R20-billion was raised on the JSE - down from the high of R60-billion in 2007.AttackThe publication of Wesson's dissertation comes at a time when share repurchasing overseas is under increasing attack from economists and analysts who say it explains a large part of listed companies' reluctance to undertake investment.The Wall Street Journal recently reported the CEO of a large listed company acknowledging that his pay structure - with lots of share awards - meant he could make more money in a few years than in his whole career by eliminating research and development spending and instead buying back shares. But the company would not exist after 10 years.The buyback wave has got so big, said economist William Lazonick in a recent issue of Harvard Business Review, that even shareholders, the presumed beneficiaries of all this corporate largesse, were getting worried.In an open letter, Laurence Fink, the chairman and CEO of BlackRock, the world's largest asset manager, noted: "Too many companies have cut capital expenditure and even increased debt to boost dividends and increase share buybacks."Lazonick, and a growing number of economists, reckon that whatever the stated reasons for buybacks, the most powerful one is that executive remuneration is now heavily exposed to share price performance - buybacks are good for share price performance. It was this conflict that led US-based analyst Michael Gumport to state way back in 2006 that share buybacks would be the next great corporate scandal.One of the most disturbing aspects of Wesson's research, which was restricted to 227 JSE-listed companies, was the difficulty she found in trying to get reliable data. This lack of reliable data explains why so little research has been done on the subject in South Africa.Wesson contends South Africa's disclosure requirements are exceptionally lax compared with other jurisdictions that allow buybacks.The most effective jurisdiction is the UK, where companies are required to disclose repurchases within 24 hours. In the US, it has to be done on a quarterly basis. The JSE's lax and poorly monitored requirements saw repurchases sometimes announced years after they were undertaken, and in almost half of the open-market repurchases no announcements were made.This meant Wesson had to trawl through the details of 10 years of annual reports for each of the 227 companies to track down equity changes. Her task was made even more daunting by the fact that South African legislation allows subsidiaries to buy back shares in their holding companies. Almost no other jurisdiction allows this...