Creating Shareholder Value: A Guide for Managers and Investors

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