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Creating Shareholder Value (Principle One (Do not manage earnings…
Creating Shareholder Value
Principle One
Do not manage earnings
Reducing investment
Development
Advertsising
Maintainence
Hiring
Delay projects
Principle Two
Making strategic decisions
Strategic analysis
Responses
Affect value?
Greatest value?
Sensitivity of value?
Questions
Value creation potential?
Limited potentials?
Overall value?
Principle Three
Acquistions
Create Value?
Destroy value?
Mergers
EPS (Earnings per share)
Ecretion (Positive)
Dilution (Negative)
Principle Four
Carry only assets that maximise value
Premium valuations
Business units
Brands
Real estate
Detatchable assets
Reduce capital/Increase value
R&D
Marketing
Outsourcing
Manufacturing
Principle Five
Return cash to shareholders
Dividends
Share buybacks
Reduce risk
Principle Six
Reward CEO and Senior Executives
Reward performance
Long term motivation
Discounted Index-optioned plan
Discounted equity risk option (DERO) Plan
Principle Seven
Reward operating unit executives
Annual plans
Long term plans
Three year cycle
Shareholder value added (SVA)
Standards
Year on Year improvement
Benchmarking
Expectations
Principle Eight
Reward middle managers
Quantifiable
Customer Retention rates
Employee Turnover
Principle Nine
Senior Executives Risks
Stock ownership guidelines
Long term investment
'Play it safe' approach
Interlinked performance goals
Risk and reward
Principle Ten
Value relevant information
Companies financial reports
Lessen investor uncertainty
Reduce capital cost
Increase share price
Corporate performance statement
Separates cash flows
Classifies accurals
Assumptions
Risks