Baby formula crisis: Abbott enriched shareholders as factory needed repairs, records show [View all]

Source: The Guardian

Baby formula crisis: Abbott enriched shareholders as factory needed repairs, records show

Economists condemn ‘rot’ in system after manufacturer issued billions in stock buybacks despite problems at Michigan factory

Tom Perkins
Fri 20 May 2022 14.23 BST
First published on Fri 20 May 2022 11.15 BST

A deadly bacteria outbreak in baby formula and an ongoing formula shortage stem from issues some economists characterize as “rot” in the nation’s economic system: prioritization of shareholder wealth and consolidation.

The embattled baby formula producer Abbott used windfall profits to enrich investors instead of replacing failing equipment that was likely injecting the dangerous bacteria into its infant nutritional products, financial records and whistleblower documents show.

Abbott detected bacteria eight times as its net profits soared by 94% between 2019 and 2021. And just as its tainted formula allegedly began sickening a number of babies, with two deaths reported, the company increased dividends to shareholders by over 25% while announcing a stock buyback program worth $5bn.

“Abbott chose to prioritize shareholders by issuing billions of dollars in stock buybacks instead of making productive investments,” said Rakeen Mabud, chief economist for the Groundwork Collaborative, a progressive economic advocacy group. “It’s important that we have high standards for something as vital as baby formula.”

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Read more: https://www.theguardian.com/environment/2022/may/20/abbott-baby-formula-shareholder-profits