Economist, consultant, and Wall Street Journal contributor Alfred Rappaport provides managers and investors with the practical tools and tests for a corporate strategy that creates shareholder value.
The ultimate test of corporate strategy, the only reliable measure, is whether it creates economic value for shareholders.
After a decade of downsizings frequently blamed on shareholder value decision making, this book presents a new and indepth assessment of the rationale for shareholder value. Further, Rappaport presents provocative new insights on shareholder value applications to: (1) business planning, (2) performance evaluation, (3) executive compensation, (4) mergers and acquisitions, (5) interpreting stock market signals, and (6) organizational implementation. Readers will be particularly interested in Rappaport's answers to three management performance evaluation questions: (1) What is the most appropriate measure of performance? (2) What is the most appropriate target level of performance? and (3) How should rewards be linked to performance? Through the lens of high-stakes case studies, like the notable acquisition of Duracell International by Gillette, Rappaport dissects the intricate decisions and risks inherent in the merger and acquisition process.
The shareholder value approach presented here has been widely embraced by publicly traded as well as privately held companies worldwide. Brilliant and incisive, this is the one book that should be required reading for managers and investors who want to stay on the cutting edge of success in a highly competitive global economy.
Autorentext
Dr. Alfred Happaport, the Leonard Spacek Professor Emeritus of J. L. Kellogg Graduate School of Management at Northwestern University, developed the idea for the Shareholder Scoreboard, published annually by The Wall Street Journal. He is co-founder and former Chairman of the Board of The Alcar Group Inc., whose consulting and education practices are now part of The LEK/Alcar Consulting Group, LLC, the U.S. operation of a worldwide strategy consulting firm. He has been a guest columnist for The Wall Street Journal, The New York Times, and Business Week, and lives in La Jolla, California.
Inhalt
List of Illustrations
Preface
CHAPTER 1. SHAREHOLDER VALUE AND CORPORATE PURPOSE
Management Versus Shareholder Objectives
Shareholders and Stakeholders
Shareholders Are "Us"
CHAPTER 2. SHORTCOMINGS OF ACCOUNTING NUMBERS
Earnings-An Unreliable Bottom Line
The Trouble with Accounting Return on Investment (ROI)
ROI Versus DCF Return Illustrated
Additional Shortcomings of ROI
Shortcomings of Return on Equity (ROE)
CHAPTER 3. SHAREHOLDER VALUE APPROACH
Estimating Shareholder Value
Estimating Shareholder Value Added (SVA)
Threshold Margin
The Shareholder Value Network
Appendix: Conventional Versus Shareholder Value Break-Even Analysis
CHAPTER 4. FORMULATING STRATEGIES
Strategy Formulation Process
Competitive Advantage and Shareholder Value
Strategy "Best Sellers"
CHAPTER 5. VALUING STRATEGIES
Strategy Valuation Process
Valuing Alternative Business Opportunities
Valuing Interdivisional Synergies
Choosing Optimal Investment Level for a New Business
Do Stock Repurchases Create Value?
Ten Value-Creation Questions
CHAPTER 6. STOCK MARKET SIGNALS TO MANAGEMENT
Reading the Market
Corporate Versus Shareholder Rate of Return
Management Implications
CHAPTER 7. PERFORMANCE EVALUATION AND EXECUTIVE COMPENSATION
CEOs and Other Corporate-Level Executives
Operating Managers
Performance Evaluation Alternatives-Shareholder Value Added (SVA)
Performance Evaluation Alternatives-Residual Income
Performance Evaluation Alternatives-Economic Value Added (EVA)
Performance Evaluation Alternatives-Change in Residual Income or Change in EVA
Leading Indicators of Value
Target Level of Performance
Linking Rewards to Superior Performance
CHAPTER 8. MERGERS AND ACQUISITIONS
The Acquisition Process
Value Creation Framework
Do Mergers Create Value for the Acquiring Company?
Gillette's Acquisition of Duracell International
Premium Advice for Targets
CHAPTER 9. IMPLEMENTING SHAREHOLDER VALUE
Implementation Objectives
Gaining Commitment
Introducing Shareholder Value
Reinforcing Shareholder Value
CHAPTER 10. THE SHAREHOLDER SCOREBOARD
A Rising Tide Doesn't Lift All Stocks
Investing as a Game of Expectations
Notes
Index
About the Author