An email has just arrived in your inbox. It is the quarterly
address from your company’s chairman to the staff: ‘The
company has seen a period of sustained growth, with
sales and profits strengthening each year. As you are no doubt aware, we
have recently had a team of management consultants working with us
to assist in developing our strategy for the future. The Board of Directors
are now committed to focusing attention on creating shareholder value
and this must be the focus of attention for all managers and staff within
the organization. Everything we do must be seen to create value. We
know we have the capability to deliver on this and we are confident
each and every one of you will play your part. Good luck! Seymour
Khash, Chairman.’ You are bemused. What is shareholder value? Is it
just another way of saying make more profit? If that’s the case, why not
just say so? It sounds like just another management fad. No doubt it
will pass and in a few months’ time everything will be back to normal.
Shareholder value is definitely not a fad and it’s a concept that is
relevant to most types of business. As such, managers should be aware
of what it is and be continually trying to devise strategies to enhance
it. In this chapter we are going to see how shareholder value combines
information in financial statements with information in the
financial press to determine whether or not a company is a worthwhile
investment
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