Chevron is a private company engaged principally in the hydrocarbon sector of the global economy. Market returns indicate that Chevron is well managed and that its board maximizes shareholder value. Over the past 12 months, Chevron’s share price is up 39%. Over that same time frame, the S&P 500 is down 19%. Over the past decade, the average annual capital return from investing in Chevron is 9% . Last week, Chevron's board announced an increase in the dividend of the company. The company has increased its dividend for 36 consecutive years. And the board authorized a share buyback with a value of $75 billion.

Shareholders of Chevron were delighted by the announcement of a dividend increase and by the large share buyback. On the date of the announcement, Chevron’s share price rose by as much as 4%. President Biden and senior Democrats, however, blasted Chevron for allocating capital to shareholder returns and not increasing its capital investment budget.

The Biden Administration and Senate Democrats want to punish Chevron for its decision to maximize shareholder value and not to perhaps destroy capital by investing in non-economic oil and gas projects.

Democrats also say that buybacks inflate the share price in order to maximize compensation for senior executives who are measured in part by shareholder returns.

These assertions are untrue. Share buybacks are an efficient form of returning capital to shareholders. Long term investors who sell into a buyback are taxed at preferential capital gains rates. Equally important, buybacks allow the board greater flexibility in returning excess capital. Buybacks also increase share liquidity which is important for an efficient market. Research shows that companies which return cash to shareholders through buybacks generally outperform the market.

This matters because many economists predict a recession in the United States.

In a recession, demand for oil will fall. It would be imprudent for Chevron's board to accelerate its capital investment budget just as the U.S. economy contracts. Lower demand will result in lower prices. In addition, the board must take account of long term forecasts of lower demand for oil as both the U.S. economy and also the global economy go green. The Chevron board owes a fiduciary duty to its shareholders, not to the political wind bags of Washington, D.C.

There's a philosophical point worth noting here. Namely, that one pillar of liberty is the right to private property. With their attacks on Chevron, Democrats are attempting to browbeat Chevron into sacrificing the property rights of Chevron shareholders for the narrow partisan interests of the President and his Party. This is base populist authoritarian politics.

It should be condemned by those who believe in the Constitution, in private property and in liberty.

James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes  a daily note  on finance and the economy, politics, sociology, and criminal justice.