Creating Shareholder Value

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.

Auteur

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.

Contenu

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