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Stephen F. Bollenbach "President and CEO, Hilton Hotels Corporation Updates all of us on the front lines with the latest thinking about creating shareholder value--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.
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The ultimate test of corporate strategy, the only reliable measure, is whether it creates economic value for shareholders. Now, in this substantially revised and updated edition of his 1986 business classic, "Creating Shareholder Value", Alfred Rappaport provides managers and investors with the practical tools needed to generate superior returns. 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.
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The idea that management's primary responsibility is to increase value has gained widespread acceptance in United States since the publication of Creating Shareholder Value in 1986. Read the first page
Front Cover | Copyright | Table of Contents | Excerpt | Index | Back Cover
The idea that management's primary responsibility is to increase value has gained widespread acceptance in United States since the publication of Creating Shareholder Value in 1986. Read the first page
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Front Cover | Copyright | Table of Contents | Excerpt | Index | Back Cover
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8 of 8 people found the following review helpful
Format:Hardcover
Professor Rappaport's revised version of his 1986 book on creating shareholder value provides a good description of the value based management concept that he helped create. However, many of the chapters are stand alone sections that do not flow well together. In some chapters he does not provide enough depth on how this book can actually be used by managers. In addition, the chapters on using his concepts to formulate value-maximizing business strategies was somewhat lacking.
Nevertheless, the book was an easy read and many of his points were right on target. I would also highly recommend interested readers to check out "The Value Imperative" by Marakon Associates and "Valuation" by McKinsey & Co for more information on value based management.
6 of 6 people found the following review helpful
Format:Hardcover
This is a great book about how to expand the value of a privately held company, especially one that is heavily leveraged (say a company that went private through a Leveraged Buy Out). The book has a great flaw, however, that you should watch out for. It assumes that improving the cash flow returns and growth of an enterprise transfer one-for-one into stock price growth. As a consultant who has worked with dozens of major companies, I can assure you that the valuation of a company is always quite different based on who owns the company and in what form. For example, a company planning to buy another public company will normally pay a 30 - 60% premium over what the company's own shareholders were willing to pay only the day before. Why? Because the new owner thinks the value is higher in the form of the combined companies, which can now be operated more effectively. Sometimes the new owner is wrong, but many times they are right. When other companies want to raise share value, they will often do this by taking subsidiaries partially public, or even breaking the company up into various tracking stocks as Pittston did very successfully. Why are investors willing to pay much more money for pieces than they are for the whole? Usually, the pieces will be managed more effectively when separated, and it is easier to understand the business. Both are important investor benefits. There are many more types of values based on ownership and ownership form, but the point is that Rappoport seems to suggest that the markets are perfectly rational, fully well informed, and never misunderstand value. If that is the case, why can a stock's value rise or fall by 30% in a year (the typical volatility of many stocks), when performance is fairly steady? Underlying this book is a source of "stalled" thinking in the Capital Asset Pricing Model. Still taught as gospel in most business schools, some studies suggest that it does an ineffective job of describing stock prices. If you read the assumptions that go with the model (no taxes paid, an individual investor perspective, perfect information, no transaction costs, etc.), you know there is no way it could work in the real world. People who follow the advice in this book run a large risk of being taken over by other companies, if their stock is publicly held. The reason is that this advice will be effective in improving cash flow and the value of the company to an acquirer, while not raising the stock price nearly as much. You will have created a better bargain for the acquirer. If that is your objective, go ahead. Otherwise, caveat emptor. To show why this is true, consider that less than half of all institutional investors do any form of valuation before making buy and sell decisions. Of those that do, less than one-third apply cash-flow valuation methods similar to those in this book. On the other hand, this work is very valuable within its limited scope. It should be renamed (more accurately) as CREATING SHAREHOLDER VALUE FOR PRIVATELY-HELD COMPANIES AND THOSE THAT WISH TO BE TAKEN OVER. Seriously, if you are a private company, this is a great book for you. Read, enjoy, and apply. If you are a public company, this book can be risky if you do not do the parallel work needed to expand your stock price while you expand your discounted cash flow value.
Format:Hardcover
For the past 12 years, `The Wall Street Journal' has published Dr. Alfred Rappaport's brainchild, the `Shareholder Scoreboard.' This special section lists 1,000 of the largest U.S. corporations (representing 90% of all listed equity values) and shows statistically how "shareholder-friendly" each one is. This journalistic feature popularizes Rappaport's "Shareholder Value" (SV) theory among institutional and individual investors. Investors use this theory to make equity commitments that reflect the author's economics-based criteria. Frankly, the lay reader who has not majored in economics, or in corporate accounting and finance, will find Rappaport's book abstruse. But it leads the way for the informed, inquisitive investor who seeks "business enlightenment" and Wall Street success. Do not be thrown off by the original 1986 print date. A classic is just that, a book that can be read and wisely used for decades. The small, silent shareholder revolution that Rappaport started is far from over. By now, shareholder analysis has become part of the mainstream for hundreds of big companies (though they accepted it gradually). SV is far from perfect as a corporate strategy indicator. The true worth of this book for CEOs and other executives resides in its lessons for implementing the SV approach throughout a corporation. We recommend it to all three informed constituencies of every public corporation: executives, employees and shareholders.
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Most Recent Customer Reviews
Great insights into aligning shareholder/stakeholder goals.
This book covers: investment and the meaning of shareholder value; unjustified conflict between gaining competitive advantage and creating shareholder value; short-comings of... Read more
Published on 19 Mar 1999
A good "HOW TO" think about Shareholdervalue" book.
It would be nearly impossible to read such a book without finding some area of disagreement. However, as a means to provoke thought and gain a better understanding of the issue... Read more
Published on 31 Dec 1998
Rappaport Knows Valuation
Rappaport's book is an informative resource for any financial manager. I now understand why Rappaport is credited with the SVA methodology. Read more
Published on 14 Dec 1998
Excellent book by creator/guru of shareholder value movement
Easy-to-read, informative for CEOs, CFOs, management and Boards of Directors interested in creating shareholder value.
Published on 20 Nov 1998
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