Synopses & Reviews
In this substantially revised and updated edition of his 1986 business classic, andlt;Iandgt;Creating Shareholder Value,andlt;/Iandgt; Alfred Rappaport provides managers and investors with the practical tools needed to generate superior returns.andlt;BRandgt;andlt;BRandgt;The ultimate test of corporate strategy, the only reliable measure, is whether it creates economic value for shareholders.andlt;BRandgt; andlt;BRandgt;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? The recent acquisition of Duracell International by Gillette is analyzed in detail, enabling the reader to understand the critical information needed when assessing the risks and rewards of a merger from both sides of the negotiating table.andlt;BRandgt; andlt;BRandgt;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.
Review
Stephen F. Bollenbach andlt;/Iandgt;President and CEO, Hilton Hotels Corporation Updates all of us on the front lines with the latest thinking about creating shareholder valueand#151;from the social aspects to the very specific. I recommend this book to any person seriously concerned about the function of a corporation in a market economy.
Review
Alan Shapiro andlt;/Iandgt;Ivadelle and Theodore Johnson Professor of Banking and Finance, Graduate School of Business Administration, University of Southern California Al Rappaport lives up to his reputation as the father of shareholder value. This book is an invaluable resource for anyone committed to creating shareholder value or teaching about it. andlt;iandgt;Creating Shareholder Valueandlt;/iandgt; presents not just the basic principles and theoretical underpinnings of its subject matter but also their application through numerous well-chosen and up-to-date real-world examples.
Review
Michael J. Mauboussin andlt;/Iandgt;Managing Director, Equity Research, Credit Suisse First Boston Corporation Herein lie the power tools of any investor's toolbox. This significant update to the seminal andlt;iandgt;Creating Shareholder Valueandlt;/iandgt; offers investors and corporate managers a theoretically sound and practically usable guide for decision making. Business people who have been jostled by the latest management fads and buzzwords will find refuge in Rappaport's well-conceived and effective framework.
Review
Martin L. Leibowitz, andlt;/Iandgt;Vice Chairman and Chief Investment Officer, TIAA-CREF Rappaport's work shines a bright light on how to systematically apply fiancial theory to the pratical problems of corporate valuation. The distinction Rappaport makes between shareholder return and corporate return is particularly critical in today's markets. Every serious ananlyst should have a firm understanding of his writings.
Review
Charles W. McCall andlt;/Iandgt;President and CEO, HBO and Company I've had the pleasure of following Al Rappaport's work for over 20 years and I feel this is his best work ever. The insights on acquisitions and the work on performance measurements are very important for fast-growing companies. Al's principles have helped us grow from a market value of less than $100 million to over $7 billion in the past six years.
Review
Harry M. Jansen Kraemer, Jr. andlt;/Iandgt;President, Baxter International, Inc Dr. Rappaport does a phenomenal job of bridging the gap between shareholder value theory and practice. I highly recommend andlt;iandgt;Creating Shareholder Valueandlt;/iandgt; for CEOs, CFOs, business school students and anyone who wants to truly understand as well as create shareholder value.
Synopsis
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? The recent acquisition of Duracell International by Gillette is analyzed in detail, enabling the reader to understand the critical information needed when assessing the risks and rewards of a merger from both sides of the negotiating table.
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.
About the Author
Dr. Alfred Happaport,andlt;/bandgt; 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 andlt;iandgt;The Wall Street Journal.andlt;/iandgt; 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 andlt;iandgt;The Wall Street Journal, The New York Times,andlt;/iandgt; and andlt;iandgt;Business Week,andlt;/iandgt; and lives in La Jolla, California.
Table of Contents
List of Illustrationsandlt;BRandgt;andlt;BRandgt;Prefaceandlt;BRandgt;andlt;BRandgt;CHAPTER 1. SHAREHOLDER VALUE AND CORPORATE PURPOSEandlt;BRandgt;andlt;BRandgt;Management Versus Shareholder Objectivesandlt;BRandgt;andlt;BRandgt;Shareholders and Stakeholdersandlt;BRandgt;andlt;BRandgt;Shareholders Are "Us"andlt;BRandgt;andlt;BRandgt;CHAPTER 2. SHORTCOMINGS OF ACCOUNTING NUMBERSandlt;BRandgt;andlt;BRandgt;Earningsand#151;An Unreliable Bottom Lineandlt;BRandgt;andlt;BRandgt;The Trouble with Accounting Return on Investment (ROI)andlt;BRandgt;andlt;BRandgt;ROI Versus DCF Return Illustratedandlt;BRandgt;andlt;BRandgt;Additional Shortcomings of ROIandlt;BRandgt;andlt;BRandgt;Shortcomings of Return on Equity (ROE)andlt;BRandgt;andlt;BRandgt;CHAPTER 3. SHAREHOLDER VALUE APPROACHandlt;BRandgt;andlt;BRandgt;Estimating Shareholder Valueandlt;BRandgt;andlt;BRandgt;Estimating Shareholder Value Added (SVA)andlt;BRandgt;andlt;BRandgt;Threshold Marginandlt;BRandgt;andlt;BRandgt;The Shareholder Value Networkandlt;BRandgt;andlt;BRandgt;Appendix: Conventional Versus Shareholder Value Break-Even Analysisandlt;BRandgt;andlt;BRandgt;CHAPTER 4. FORMULATING STRATEGIESandlt;BRandgt;andlt;BRandgt;Strategy Formulation Processandlt;BRandgt;andlt;BRandgt;Competitive Advantage and Shareholder Valueandlt;BRandgt;andlt;BRandgt;Strategy "Best Sellers"andlt;BRandgt;andlt;BRandgt;CHAPTER 5. VALUING STRATEGIESandlt;BRandgt;andlt;BRandgt;Strategy Valuation Processandlt;BRandgt;andlt;BRandgt;Valuing Alternative Business Opportunitiesandlt;BRandgt;andlt;BRandgt;Valuing Interdivisional Synergiesandlt;BRandgt;andlt;BRandgt;Choosing Optimal Investment Level for a New Businessandlt;BRandgt;andlt;BRandgt;Do Stock Repurchases Create Value?andlt;BRandgt;andlt;BRandgt;Ten Value-Creation Questionsandlt;BRandgt;andlt;BRandgt;CHAPTER 6. STOCK MARKET SIGNALS TO MANAGEMENTandlt;BRandgt;andlt;BRandgt;Reading the Marketandlt;BRandgt;andlt;BRandgt;Corporate Versus Shareholder Rate of Returnandlt;BRandgt;andlt;BRandgt;Management Implicationsandlt;BRandgt;andlt;BRandgt;CHAPTER 7. PERFORMANCE EVALUATION AND EXECUTIVE COMPENSATIONandlt;BRandgt;andlt;BRandgt;CEOs and Other Corporate-Level Executivesandlt;BRandgt;andlt;BRandgt;Operating Managersandlt;BRandgt;andlt;BRandgt;Performance Evaluation Alternativesand#151;Shareholder Value Added (SVA)andlt;BRandgt;andlt;BRandgt;Performance Evaluation Alternativesand#151;Residual Incomeandlt;BRandgt;andlt;BRandgt;Performance Evaluation Alternativesand#151;Economic Value Added (EVA)andlt;BRandgt;andlt;BRandgt;Performance Evaluation Alternativesand#151;Change in Residual Income or Change in EVAandlt;BRandgt;andlt;BRandgt;Leading Indicators of Valueandlt;BRandgt;andlt;BRandgt;Target Level of Performanceandlt;BRandgt;andlt;BRandgt;Linking Rewards to Superior Performanceandlt;BRandgt;andlt;BRandgt;CHAPTER 8. MERGERS AND ACQUISITIONSandlt;BRandgt;andlt;BRandgt;The Acquisition Processandlt;BRandgt;andlt;BRandgt;Value Creation Frameworkandlt;BRandgt;andlt;BRandgt;Do Mergers Create Value for the Acquiring Company?andlt;BRandgt;andlt;BRandgt;Gillette's Acquisition of Duracell Internationalandlt;BRandgt;andlt;BRandgt;Premium Advice for Targetsandlt;BRandgt;andlt;BRandgt;CHAPTER 9. IMPLEMENTING SHAREHOLDER VALUEandlt;BRandgt;andlt;BRandgt;Implementation Objectivesandlt;BRandgt;andlt;BRandgt;Gaining Commitmentandlt;BRandgt;andlt;BRandgt;Introducing Shareholder Valueandlt;BRandgt;andlt;BRandgt;Reinforcing Shareholder Valueandlt;BRandgt;andlt;BRandgt;CHAPTER 10. THE SHAREHOLDER SCOREBOARDandlt;BRandgt;andlt;BRandgt;A Rising Tide Doesn't Lift All Stocksandlt;BRandgt;andlt;BRandgt;Investing as a Game of Expectationsandlt;BRandgt;andlt;BRandgt;Notes andlt;BRandgt;andlt;BRandgt;Indexandlt;BRandgt;andlt;BRandgt;About the Author