Creating Shareholder Value by Alfred Rappaport – In this substantially revised and updated edition of his business classic, Creating Shareholder Value. only reliable measure, is whether it creates economic value for shareholders. of his business classic, Creating Shareholder Value, Alfred Rappaport. VBM Thought Leader: Alfred Rappaport. Creating Shareholder Value. The New Standard for Business Performance. Alfred Rappaport About Alfred Rappaport.

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The second factor likely to influence management to adopt a shareholder orientation is compensation tied to shareholder return performance. First consider the case of customers. With the globalization of competition and capital markets and a tidal wave of privatizations, shareholder value rapidly is capturing the attention of executives in the United Kingdom, continental Europe, Australia, and even Japan.

Creating Shareholder Value – The new Standard for Business Performance is a true achievement in human thinking; like classical music, creating shareholder value from Alfred Rappaport will forever remain an excellent piece of art. These employees are unlikely to find jobs elsewhere that pay as much as their current employment. Because of limited market liquidity, shares would have to be sold at a discount to their most recent price. If the company invests in a risky project, stockholders can always balance this risk alrred other risks in their presumably diversified portfolios.

Alex rated it it was amazing Aug 21, Enlightened self-interest dictates that shareholders and other stakeholders actively engage in a partnership of value creation. While sharreholder top executives in many companies often have relatively large percentages of their wealth invested in company stock, this is much less often the case for divisional and business unit managers.

There still is no free lunch.

Creating Shareholder Value: A Guide For Managers And Investors – Alfred Rappaport – Google Books

Because of its ambiguity and lack of enforceability, the corporate social responsibility model gets little support from policymakers and corporate governance activists today. There is unfortunately another side to restructuring and employee layoffs.

Shareholders are not the frequently vale wealthy, self-serving Wall Street caricatures, but instead are largely individuals who invest human capital in their place of employment and financial capital across a broad cross section of the economy.

Every serious ananlyst should have a firm understanding of his writings. In a world in which principals e. Agents have their rwppaport objectives and it may sometimes pay them to sacrifice the principals’ interests. Some economists argue that employees with firm-specific skills bear the residual risk of the company along with its shareholders and therefore should have rights on par with shareholders.


But it is these decisions that subordinate shareholder interests that trigger the much maligned corrective mechanisms of takeovers and restructuring.

In the s corporate governance discussions are replete with references to “balancing the interests of all stakeholders. Alfred Rappaport is one of the founders of the creating shareholder value mindsetwhich gained importance in the ’80s and still growing and increasingly accepted worldwide.

Eric Connerly rated it really liked it Apr 28, Years of restructuring and employee layoffs frequently attributed to shareholder value considerations coupled with politicians who charge top management with self-interest and a shortsighted focus on the current stock price have promoted frustration and uncertainty.

The introductory chapter is of more philosophical nature than the remainder and the author develops his thoughts on why the shareholder value approach is the one to adhere to for businesses. Ashiesh Bhatia rated it it was amazing May 11, Providing a comparable product at a lower cost than competitors, or providing superior value to the customer through higher quality, special features, or postsale services, vreating not genuine advantages if the total long-term cost, including the cost of capital, is greater than the cash generated by the sale.

Want to Read Currently Reading Read. Recommended measures and their linkage to incentives are detailed in Chapter 7. However, the implementation of shareholder value should not be viewed as either proprietary or a sustainable advantage, because global competitors are quickly incorporating it into their planning and decision making processes as well.

Patrick Voigt rated it liked it Oct 24, Over the next ten years shareholder value will more than likely become the global standard for measuring business performance. Indeed, Main Street is fast replacing Wall Street. Hence, the main audience is corporate managers but the book is equally useful to anyone on the financial markets as it addresses issues bordering between business and finance.

The question in the case of division managers is, first, how does the labor market monitor and gain insights about their performance and second, what is the basis for valuing their services.

Now, in this substantially revised and updated edition of his business classic, Creating Shareholder Value, Alfred Rappaport provides managers and investors with the practical tools needed to generate superior returns.

And it is shareholxer the divisional and business unit levels that most resource allocation decisions are made in decentralized organizations. 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.


The third factor affecting management behavior is the threat of takeover by another company. How managers communicate their value valu the labor market outside of their individual firms is less apparent.

The question here is whether these measures are linked reliably to the market price of the company’s shares. Entering the s CEOs of many public companies were relieved to see Wall Street raiders move backstage. Losses, whether taken in the name of social responsibility or due to poor decision making, come out of the pockets of retirees, workers, and other individuals who depend on management to maximize shareholder value.

Institutions, primarily pension funds and mutual funds, hold 57 percent of the stock in the one thousand largest U. Such imposed costs invariably will be passed on to consumers by way of higher prices, to employees as lower wages, or to shareholders as lower returns. The most direct means of linking top management’s interests with those of shareholders is to base compensation, and particularly the incentive portion, on market returns realized by shareholders.

The author discusses the chance of gaining a competitive advantage in various industries and shows that management can work with a number of value drivers to increase shareholder value a sales growth rate, b profit margin, c working capital investment, d fixed capital investment and e the cost of capital. Many companies, particularly those in mature industries such as oil, allocated their very substantial excess cash flow toward uneconomic reinvestment or ill-advised diversification.

VBM Thought Leader: Alfred Rappaport

In such a world, fund managers will be monitored as never before and shareholedr, in turn, can be expected to push the companies in their portfolios for performance alfrrd never before. Michael has been an adjunct professor of finance at Columbia Business School since and is on the faculty of the Heilbrunn Center for Graham and Dodd Investing. Chief executives of some of our largest companies have contended that shareholder interests should not be their primary obligation.

Michael joined CS in as a packaged food industry analyst. Other editions – View all Creating Shareholder Value: Selected pages Title Page.