Latest News

M&S Number One At Destroying Shareholder Value
(Extract from the FT)
Marks & Spencer registers lowest Total Shareholder Return (TSR) of FTSE companies. 10 Jan 2001

How Risky is The Risk Premium?
(Extract from Business Week)
Equity Risk Premium is fundamental to corporate valuations. 11 Jan 2001

PwC Launches First Global Index that Measures the Impact of Business, Economic, Legal and Ethical Opacity on the Cost of Capital Around the World
A panel of economists and researchers brought together by PricewaterhouseCoopers Endowment for the Study of Transparency and Sustainability has created an analytical model correlating five key opacity factors to the cost of capital in 35 countries.
Comment: You can also download a chart showing the opacity index for the countries involved in the study..

Measuring Where Capital is Created
(Extract from the FT)
New means of assessing company performance are returning to cash and how, when and where it flows. 11 Jan 2001


Archived News
Past news items can be found in the news archive.


Feature Articles

Value Based Management - Economic Value Added or Cash Value Added?
A superb article from Capital Ideas Online on the long-running debate over which VBM metric is superior. Though it may sound rather narrow in focus, this article covers a lot of ground, summarising the different perspectives with admirable clarity. It serves as an invaluable introduction to VBM metrics, provides background, and also brings the reader up-to-date with current thinking. This article was spurred by a new book on the same topic. An article on this topic by the author was previously featured here and is now linked in the archive. Here's a second chance to read it.

Value And E-fficient Markets
Efficient Market Theory contends that the company's share price reflects all the information regarding that firm's present market value. So how did dot-com valuations reach such pie-in-the-sky proportion? This article explains that it wasn't a failure in Efficient Market Theory so much as a severe lack of information on firms which were completely unknown and should never have been taken public. The good news? Efficient markets may lag a little sometimes, but they always catch up in the end.

Shareholder Value at Risk for Companies Pursuing Revenue or Profit Growth Alone
According to landmark 12 year study of 1,100 companies by A.T. Kearney, those with a sustained, balanced growth strategy outperformed their peers by a margin of 50 percent, demonstrating that a balanced approach to revenue and profit growth is the most successful strategy for building long-term shareholder value. Details on the book covering the study can be found here.

Value Dynamics White Paper
From a new white paper by Arthur Anderson: "In a world beset by ever-greater competitive pressures and economic uncertainties, savvy managers know they must squeeze advantages from every asset within their grasp. Read how to identify those assets and make them work for you in our new white paper: "Beyond e-business: What is creating value today."
Comment: You can download the PDF directly here.

Lean Value Comes of Age:  Maximising Shareholder Value in the New Millennium
This is the title of a new book by the value-based management gurus at VBM Consulting. In this accompanying article they explain why focusing on value will become even more important as the economy slows down.

"Formula for Success"
Focus may be the key to maximising shareholder value.

A Passion for Value
Success for most superior corporate performers is not a matter of bold strategic moves, but of thousands of decisions that create shareholder value at all levels. This requires the CEO and top management to develop a passion for value, and transfer it to employees at all levels.

Measuring Corporate Excellence
XVA is the market value premium or discount to economic book value that cannot be explained by the competition. Finegan tracks XVA for 1703 firms over 5yrs. The results are discussed here.


Featured Articles Archive

Terminal Value Abuse
The key elements of any and all general valuation formulas have been around for three decades now and are thus very well known. Yet, people persist in trying it on. In this article, Clark and Neil of VBM Consulting expose the terminal value shell game of substituting predicted equity market gains for free cash flow.

What Would Shareholders Say?
The key to implementing VBM is in putting this at the centre of a firm's cultural ethos.

'Risk-Adjusted' Yardstick May Be Misnamed
Article on RAROC by William W. Alberts--one of the founders of the shareholder value approach.

Articles on Marakon's Approach to Maximising Shareholder Value
Marakon is the firm whose founders invented the practice of focusing on shareholder value. However, they only take 15 clients at a time, and usually for a period of 5-10 years. Some of their clients include Coca-Cola, Dow Chemical, BankAmerica, Lloyds TSB, Boots and Cadbury Schweppes. Therefore, seeing as you're unlikely to become a client of theirs anytime soon, the next best option is to read about what they do. Here's a sample.

The Holy Grail of Shareholder Value Measurement
(Excerpt from Business Finance)
If you are hoping to find one perfect measure of shareholder value, you'll likely be disappointed, says Jim McTaggart, chairman of Marakon Associates in Stamford, CT. Even so, he says, companies can get a handle on shareholder value measurement using a combination of three primary metrics: economic profit (profit minus capital charge), value creation (present value of future cash flows) and total shareholder return (capital gains plus dividends). Feb 2000

Put Value Creation First (If You Want to Grow Your Way to Greatness)
Provides lessons for corporate leaders who are now giving high priority to growth following the years of re-structuring, re-engineering and downsizing. While the wrong kinds of growth can actually destroy value, this commentary shows executives how to grow their businesses in directions that extend, defend and improve their business model.

Setting Targets to Maximize Shareholder Value
Highlights the danger that top-down performance targets can erode strategic thinking throughout a company, leading to target-driven decision-making and remote-control management from the corporate centre. Argues that performance targets can help to make wealth creation a core competency when the company commits to a clear governing objective of maximizing shareholder value; translates that goal into a single, overriding, internal measure of performance; and puts in place a strategy development process that is focused on identifying the highest value strategy and detailed implementation targets for each business.

Cash Value Added - a Framework for Value Based Management
Many use Discounted Cash Flow when evaluating investments. But how are those investments followed up? Well, the Cash Flow view is abandoned. Instead, accounting is used. This is inconsistent and not very shareholder friendly. But no Cash Flow model has yet been able to bridge the gap between the evaluation of historic return and Cash Flow based evaluation of future investments. The authors have developed a Cash Flow based model that can solve this problem. It gives a relevant picture of a company's profitability and contributes to a more effective capital allocation on the market.

Economic Value Added or Cash Value Added?
Lengthy paper comparing two of the main frameworks in value based management: EVA and CVA

What Really Matters in Creating Share Value?
If not metrics, where are all those consulting dollars going? Finegan & Co explains. Myth vs. Reality: The Key Challenges in Developing Effective Performance-Based Incentives


Resources
Includes article archives, case studies, surveys, interviews and links to resource sites from firms offering services in this area. Don't forget to check the Reference Centre for links to resources that apply to all areas of interest.

TSR report on FTSE 350
Here is the TSR report on companies in the FTSE 350.

Financial Press and News Articles on VBM
Latest from news and business magazines on value-based management.

Articles from Finegan at Shareholdervalue.com
Hot Topics in VBM, EVA and Strategic Risk Management, EVA, corporate finance, enterprise risk management, metric wars, leveraging. (All documents are PDF's)

"Capturing all the Value"
A VBM Consulting presentation on focusing on shareholder value.

Marakon Commentary
A series of essays by Marakon partners, distributed to clients and the wider community of top corporate executives. Appearing four times a year, the series shares highlights their thinking about strategy and general management practice. PDF's can be downloaded.

More articles on CVA
Further articles from Swedish firm Anelda on using cash flow to manage performance.

Business Consulting Newsletter
Arthur Anderson produces this monthly best practices newsletter for improving performance and value.

Directors' Remuneration Report 2000
Arthur Andersen Human Capital Services team have produced the latest annual survey of directors' remuneration. You can download a free 10 page summary here.

Value Monitor International
Tracks and reports on TSR performance for client firms.

Evaluator
Software solution for implementing value based management.

CPS
Provides sophisticated enterprise financial analysis systems used by large banks and corporations around the world for: Strategic planning / Capital budgeting, Corporate finance / M & A analysis, VBM, equity research, etc.

Papers on Value-Based Management
From the Kellogg business school.


Reference
Learn about the fundamentals here. Links to dictionaries and encyclopaedias, glossaries, introductory material and concept-based learning.

Value Based Management  Resource Centre
This site provides a simple but intelligent introduction to value-based management. It consists of an introduction to the concepts involved in it's definition: "Value management is the effective linkage between strategy, measurement and processes to create shareholder value." Then the performance measures typically used in VBM. And finally a library containing an archive of important information pertaining to Value Based Management. Within are books, articles, and a list of seminars relevant to the study and utilization of VBM. The library contains a host of introductory articles on these topics.

VBM Glossary
Glossary of common VBM terms.


Links
The key links for this area can be found on the Links page under Performance and Value-based Management. The following are some supplementary links not included on the Links page.