During the stock market boom of the 1980s and 1990s the argument that “maximising shareholder value” results in superior economic performance dominated corporate governance debates. Economists argued companies should disgorge their “free cash flow” to create value for shareholders, rather than horde cash or invest in productive capacity that was insufficiently profitable.

Traditionally companies distributed cash to shareholders through dividends. Increasingly, however, the payouts of US companies have taken the form of stock repurchases – total repurchases surpassed total dividends in 1997. Over the past five years, stock buy-backs have increased at a remarkable rate. Combined, the 500 companies in the S&P 500 index in January 2008 repurchased $120bn in 2003 and $597bn in 2007; in 2007 repurchases represented 90 per cent of their net income, while dividends were another 39 per cent.