High Performance Businesses
Winter 2004, Volume 16.1
Creating Value At A Conglomerate: The Case Of The Godrej Group
Adi Godrej, chairman of the Godrej Group, argues that conglomerates are a more efficient entity in developing countries, as they make the best use of managerial talent and capital that are otherwise in short supply. In addition, the use of EVA performance criteria for Godrej’s divisions has not only improved performance but has allowed decentralization of day-to-day decision-making.
Creating Value In The Oil Industry
The size and structure of large integrated oil companies create advantages that translate into lower capital costs. But these lower costs are not reflected in the overly high target returns on capital currently set by the oil majors. A performance measurement framework based on economic profit would encourage managers to accurately assess capital costs and take on all value-increasing projects.
Future Value: The $7 Trillion Challenge
As of May 2003, $7.6 trillion (58%) of the aggregate value of the U.S. stock market represented “future value”—the portion of value that does not reflect current operating performance but rather anticipated growth. Accenture has developed a set of tools for examining the drivers of future value to enable executives to translate corporate intangibles into manageable market value.
National Defense, Oil Imports, And Bio-Energy Technology
Terrorist disruptions of crude oil supplies present a serious threat. The authors propose insulating U.S. energy prices from world price volatility by gradually eliminating imports and expanding domestic production, particularly from bio-energy sources. Equilibrium crude prices will be somewhat higher but much more stable, which would promote a stronger and more secure economy in the long run.
Perhaps EVA Does Beat Earnings—Revisiting Previous Evidence
In sharp contrast with previous research, correlation data between updated EVA information and stock price performance shows that “EVA has greater power than earnings in explaining market-adjusted stock returns.” This finding validates the widespread corporate acceptance of EVA as a value-relevant management tool.
Redefining High Performance
To help companies prosper in this new era of fluid market and industry boundaries, Accenture has identified the most successful companies in 18 of today’s largest industries, along with key value drivers in each. The performance criteria include a combination of market-based indicators and operating measures and reveal a number of common capabilities for delivering shareholder value.
The Weinburg Center Roundtable on Corporate Governance and Executive Pay: Problems and Solutions
This roundtable brings together a small group of people from academia, business, institutional investing, and the courts to discuss problems with executive pay and corporate governance.
Toward A Global Model Of Venture Capital?
While the U.S. leads the world in private equity investing, other countries are also experiencing growth in this area, despite fragmented regulatory regimes and inadequate investor protections. Government efforts to improve the investor climate should focus on reducing regulation and lowering taxes. Countries with a common-law tradition, such as India, are well positioned for growth.
Transferable Stock Options (TSOs) And The Coming Revolution In Equity-Based Pay
Transferable stock options, pioneered by Microsoft in July 2003, have important advantages over both conventional employee stock options (ESOs) and the restricted shares now widely viewed as the most promising replacement for ESOs. They avoid the fragility and value-to-cost inefficiency of conventional options as well as the “pay-for-pulse” problem of restricted shares.
The views and opinions expressed in the Journal do not necessarily represent those of Morgan Stanley or its affiliates.
|
|
For close to 20 years, the Journal of Applied Corporate Finance has distinguished itself as a unique forum for addressing the topics that drive corporate value. Featuring articles by top academic thinkers and financial practitioners, this quarterly publication presents the practical application of the best current research in finance.
|
|
