Corporate executives are lightning rods for criticism. But although eight-figure CEO salaries and ridiculously cushy perks get most of the attention from the media, other decisions made at the corporate boardroom level have a much larger impact on shareholder wealth -- and all too often, result in destroying that wealth.

How companies (ab)use your money
One of the biggest decisions that corporate leaders have to make is how to allocate their company's capital. Healthy businesses generate substantial amounts of cash flow, which then raises the question of how that money can best be used. If a company sees profitable opportunities to reinvest its profits back into its business, then the success or failure of its efforts is directly reflected in future financial results. Similarly, moves to pay down debt result in lower interest costs, which can raise earnings and improve results.

On the other hand, a company can return its excess cash to shareholders, either by paying a dividend or by buying back shares of company stock. With a dividend, shareholders make the ultimate decision about where the money goes. But with a buyback, corporate leaders are implicitly saying that their company's stock is a good investment at current prices -- and they're putting shareholder money where their mouths are.

Big, big buybacks
Recently, CNBC took a look at the biggest buybacks of the past decade. Although CNBC focused primarily on how the stocks performed during and immediately after the buybacks were completed, what struck me most about the programs was just how bad their timing sometimes was.

Here's a summary of some of the largest buyback programs:


Amount of Buyback

Time Buyback Program Occurred

Return Since Buyback Ended

Microsoft (Nasdaq: MSFT)

$36.2 billion

July 2006 - Aug. 2008


General Electric (NYSE: GE)

$27 billion

Dec. 2004 - Dec. 2007


Procter & Gamble (NYSE: PG)

$20.1 billion

Jan. 2005 - July 2006


Time Warner

$20 billion

Aug. 2005 - Aug. 2007



$15.1 billion

Jan. 2007 - Dec. 2008



$15 billion

Feb. 2008 - Dec. 2009


Citigroup (NYSE: C)

$15 billion

April 2005 - Aug. 2006



$13.5 billion

March 2006 - Dec. 2007


Source: CNBC, Yahoo! Finance.

Granted, some of these buybacks turned out fairly well. In particular, IBM stands out as having implemented a buyback program just as the bear market was beginning. Similarly, P&G and Microsoft weathered the market meltdown better than others, and so they turned out to have made reasonable investments with their cash.

But more often, companies' capital allocation decisions proved to be disastrous. In particular, Citigroup had to go back to the capital markets to sell stock during the financial crisis at prices far below what it paid to buy back stock earlier in the decade. Most of the banks it competes with made similar mistakes. General Electric got expensive financing from Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) with onerous terms, including a 10% dividend and multi-year warrants to buy additional shares. That almost certainly made GE regret having overpaid for share buybacks in previous years -- although Warren Buffett and his shareholders have to be happy about it, especially the way things have turned out.

The worst part of this debacle is that it was completely unnecessary. Simply by paying higher dividends, these companies could have disposed of their cash in a way that left the decision on whether to reinvest in additional shares of stock to each individual shareholder. Those who reinvested their dividends in stock that lost value wouldn't have been happy, but they couldn't have passed the blame for their bad fortune onto the executives of their company for a bad capital allocation decision on their behalf.

Pay attention
Like other traits that corporate executives must have, intelligent capital allocation is a skill. And like any skill, some people have more of it than others. If your leader is good at buying company stock low and selling it high, then buybacks make a ton of sense. But if the only thing stock buybacks are doing for a company whose shares you own is destroying shareholder wealth, then either demand change, or vote with your feet. Your financial survival may depend on it.

Don't waste your hard-earned investment dollars. Fool contributor Morgan Housel explains how banks are blowing up the entire economy.

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Fool contributor Dan Caplinger thinks money is a terrible thing to waste. He owns shares of Berkshire Hathaway and General Electric. Berkshire Hathaway and Microsoft are Motley Fool Inside Value choices. Berkshire Hathaway is a Motley Fool Stock Advisor selection. Procter & Gamble is a Motley Fool Income Investor recommendation. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Berkshire Hathaway and Procter & Gamble. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy doesn't waste your time.