Building and Communicating Shareholder Value

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More information from http://www.researchandmarkets.com/reports/29381/



Building and Communicating Shareholder Value

Description:
Building and Communicating Shareholder Value will be the single most valuable investment your
organisation makes on the road to delivering sustainable shareholder value. The creation of
shareholder value is the primary objective of any organisation, be it a plc or privately funded
company - and research indicates that the pressure senior managers already face to deliver value
will intensify significantly into the future. Today it is vital that senior management builds and
delivers superior long-term value to meet and exceed the expectations of all its organisations’
shareholders. Discover how this report will enable your organisation to deliver superior long-term
value to its shareholders.

Contents:
Chapter 1: Introduction 1
Executive Summary 1
Section A: Context 2
Section B: Defining Shareholder Value 3
Sustainable Shareholder Value 3
Section C: The Pressure to Deliver Shareholder Value 5
Pressure on Institutional Investors 6
Alternative Homes for Capital 7
Section D: The Shortcomings of Conventional Accounting Measures 8
Reported Profit 8
Earnings Per Share 9
Return on Capital Employed 10
Section E: The Benefits of Shareholder-facing Approaches 10
EVA 10
CFROI 11
Section F: Perceived Weaknesses of Value-based Systems 11
Stakeholder Interests 12
E-commerce 12
Section G: Conclusion 13
Key Learning Points 13
Case Study: Electrolux 15
Chapter 2: Building and Communicating Shareholder
Value – A Research Survey into Present
Trends and Practice 25
Executive Summary 25
Section A:Ten Key Findings 26
Section B: Context 28
The Pressure to Deliver Shareholder Value 29
The Efficacy of Value-based Management Approaches 29
Corporate Performance Management Frameworks and Value Creation 29
Communicating Value Creation 29
Shareholder Value: Future Threats and Opportunities 29
Section C: The Pressure to Deliver Shareholder Value 30
Increasing Shareholder Pressure 30
Why Shareholder Pressure has Increased 31
Section D: The Efficacy of Value-based Management Approaches 32
Favoured Value-based Approaches 32
Consultancy Models Used 32
Value-based Approaches and Managerial Decision-making 33
Managerial Bonuses and Value Creation 33
Bonus Systems and the General Employee-base 35
ESOPs and Value Creation 37
Section E: Corporate Performance Management Frameworks
and Value Creation 37
Usage of Corporate Performance Management Frameworks 38

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Frameworks and Long-term Shareholder Value 38
Corporate Performance Management Frameworks
and Value Creation Systems 38
Corporate Governance 39
Awareness of Corporate Strategy 40
Value-based Management, Strategic Planning and Budgeting 41
Section F: Communicating Value Creation 42
The Annual Report 42
Communicating Non-financial Metrics 43
Section G: Shareholder Value – Future Threats and Opportunities 44
The Pressures of Internet-based Working 44
Threats and Opportunities 45
Section H: Conclusion 46
Key Learning Points 47
Case Study: Hallco 1812 48
Chapter 3: Value-based Management Techniques Explained 59
Executive Summary 59
Section A: Context 60
Business Intelligence Survey 61
Section B:Value-added Systems 61
EVA 62
The System 62
Calculating EVA 63
Defining Capital 66
Capital Asset Pricing Model 66
Cost of Debt 68
Market Value Added 68
Increasing EVA 69
Views on the Efficacy of Value-based Approaches 70
Perceived Shortcomings 71
Section C: Cash Flow Return on Investment 73
The CFROI Framework 73
CAPM Shortcomings 75
Calculating CFROI 76
A Total System Approach 79
CFROI Shortcomings 79
Section D: Total Shareholder Return 80
TSR Explained 80
Boston Consulting Group Research 80
Cash Value Added 81
TSR Strengths 82
TSR Shortcomings 83
Misleading Comparisons 83
Section E: Conclusion 84
Key Learning Points 85
Case Study: Unilever Plc 86
Chapter 4: ‘Balanced’ Value-creating Approaches 99
Executive Summary 99
Section A: Context 100
Section B:Taking a ‘Stakeholder’ Approach 101
Stakeholder Benefits 101
Case Report:The Co-operative Bank 102
Case Study Examples 103
Disadvantages of a ‘Stakeholder’ Approach 105
Section C: Corporate Strategy 106
Section D: The Balanced Scorecard 107
The Balanced Scorecard Explained 107
Principles of the Strategy-focused Organization 111
Scorecard Strengths 113
Scorecard Weaknesses 114
Section E: The Balanced Scorecard and Value-based Methodologies 116
Key Differences 116
Case Report:Whirlpool Corporation 117

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CFROI and Non-financial Metrics 119
Section F: Intellectual Capital 121
Intellectual Capital Explained 121
Case Report: Skandia 122
Case Report: Clarica 125
Section G: Conclusion 126
Key Learning Points 126
Case Study: Nova Scotia Power Inc 127
Case Study: Clarica 138
Chapter 5: Value-based Decision-making 151
Executive Summary 151
Section A: Context 152
Section B: Research Findings 152
Business Intelligence Survey Findings 152
Boston Consulting Group Study Findings 153
Case Report: Dell Computer Company 154
Section C: Management and Value Creation 156
Managerial Skills-set 156
Managerial Commitment 157
Board Commitment 157
Case Report: Tate & Lyle 158
Case Study Examples 159
Reporting Economic Profit 160
Section D: Recognizing the Source of Value 160
Value Assessment 161
Value Driver Analysis 163
Management Process Redesign 164
Value Reporting 164
Section E: Strategic Planning 164
Making Trade-offs 165
Rolling Strategic Forecasts 165
Valuing Improvement Initiatives 165
Strategic Planning: Key Learning Point 166
CFROI and Decision-making Processes 166
Section F: Real Options 167
Defining ‘Real Options’ 167
Practical Example 168
EVA and Real Options 169
Case Report: US Assembler 169
The Importance of Risk 170
Section G: Budgeting and Value-based Approaches 171
Section H: Mergers and Acquisitions 172
The ‘Ego’ Problem 172
Synergy and Price Evaluation 172
Case Report: Herman Miller 173
Case Report: Manitowoc 174
Case Report: Clarica 175
PA Consulting Research Findings 176
Section I: Conclusion 177
Key Learning Points 178
Case Study: Manitowoc Company, Inc 179
Chapter 6: Implementing and Communicating Value-based
Management Deep Within an Organization 189
Executive Summary 189
Section A: Context 190
Major Change Programme 191
Section B: Continuous Improvement 192
Day-to-day Performance Improvements 192
Thinking Small as Well as Big 192
Devolving Value Targets 193
Case Report: Hallco 1812 193
Case Report: Siemens KWU 194
Section C: Culture Change 195

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A Long Process 195
Stern Stewart and the Importance of the Corporate ‘Mindset’ 195
Case Study Examples 196
Case Report: Millennium Inorganic Chemicals 197
Key EVA Errors 197
Section D:Training and Education 198
A Cascaded Approach to Training 199
Case Report: Tate & Lyle 199
Training Materials 200
Section E: Internal Communications 200
Business Intelligence Survey Finding 201
A Circumspect Approach 201
Managerial Communication 203
Case Report: Millennium Chemicals 203
Case Report: Hallco 1812 – Fantasy Football 203
Communicating the EVA Calculation 204
Communicating Performance Figures 205
Piloting Value-creation 206
Section F: Conclusion 206
Key Learning Points 207
Case Study: Herman Miller 208
Chapter 7: Compensation and Shareholder Value 221
Executive Summary 221
Section A: Context 222
Section B: Senior Management Compensation and Value Creation 223
Executive Compensation and Poor Performance 223
Cadbury Recommendations 224
Survey Evidence 224
PricewaterhouseCoopers Research 226
Section C: EVA Incentive-compensation System 228
Research Findings 228
The Perceived Benefits to Organizations of Taking this Approach 229
An Explanation of How an EVA Bonus System Works 230
Examples of EVA Incentive-compensation Plans 231
Business Intelligence Research 231
Differing Bonus System Approaches 232
Section D: Share Option Schemes 234
Research Findings: Paying for Performance 234
Share Option Schemes and Shareholder Value Creation 235
Management Share Option Guidelines 237
Employee Share Option Programmes (ESOPs) 238
Case Report: Tesco 239
Advisers’ Viewpoints 239
Non-executive Directors and Shareholdings 240
Case Report: Pilkington 241
Section E: The Balanced Scorecard and Shareholder Value 242
Case Report: Nova Scotia Power Inc 242
Case Report: UNUM Corporation 243
Weighted Measures 244
The Balanced Scorecard and EVA 245
Case Report:Whirlpool 245
Section F: Conclusion 247
Key Learning Points 248
Case Study: Sirona 250
Chapter 8: Communicating Value Creation to Shareholders
and Wider Stakeholder Groups 259
Executive Summary 259
Section A: Context 260
Research Findings 261
Section B: Communicating Economic Performance 261
Case Study Examples 262
Investor Interest 262
Shareholder Views on EVA 263

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Not Depending on EVA 264
Section C:What Investors Look For 265
What Drives Value in the Business? 265
The Organization’s Ability to Sustain Value Over Time 266
The Quality of the Management Team 267
The Present Stock Market Valuation 267
EPS and the Financial Markets 268
HOLT Value Associates/Deloitte Consulting Research Findings 268
Section D: Research Findings 269
Section E: The Importance of Non-financial Data 272
Business Intelligence Research Findings 272
Investor Views 273
Ernst & Young Research Findings 274
Section F: HOLT Value Template 275
Section G: Shareholder Questions 276
‘Recommended Model of Business Reporting: Non-financial and
Forward-looking Measures’ 278
Section H: Annual Report 280
Research Findings 280
Prototype Plc 281
Case Report: Skandia – Reporting Intellectual Capital 285
E-reporting 286
Section I: Conclusion 287
Key Learning Points 288
Case Study: The Co-operative Bank 289
Chapter 9: Implications of the New Economy and Report
Conclusions 299
Executive Summary 299
Section A: Context 300
Section B: The DotCom Explosion 301
Investment Strategies and Internet-based Companies 301
Method in the Madness 302
Historical Precedents 302
Future Market Options 303
Section C: The Implications for Traditional Companies 304
Bricks and Clicks Collaborations 305
Section D: The New Economy and Conventional Accounting Measures 306
A Value-based Mindset? 306
EVA and Internet Companies 307
Case Report: RealNetwork Inc 307
Section E: Report Conclusions 308
Key Learning Points 318
Case Study:Wannago.com 320
Appendix – Listings 329
References 331
Index 339

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