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2017 | Buch

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Customer Value, Shareholder Wealth, Community Wellbeing

A Roadmap for Companies and Investors

verfasst von: Denis Kilroy, Marvin Schneider

Verlag: Springer International Publishing

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book provides a roadmap for leaders of listed companies to follow in order to build enduring institutions that create value for customers and wealth for shareholders on an ongoing basis, in ways that also enhance the wellbeing of all other legitimate stakeholders – including the wider community and the environment.

Customer Value, Shareholder Wealth, Community Wellbeing is an inspirational work that confirms the very positive role that a more expansive, more inclusive and more conscious approach to business, can play within our society.

It incorporates a breakthrough in understanding in applied corporate finance and business economics centred on the Bow Wave of Expected Economic Profits. This construct provides an economic underpinning for a new and more socially responsible business paradigm – demonstrating for the first time exactly how the performance produced by management in the market for their company’s products and services, translates into the capital market outcomes experienced by shareholders.

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Inhaltsverzeichnis

Frontmatter

The Challenge

Frontmatter

1. Clarifying the Goal

Abstract

The purpose of this first chapter is to set the scene with two important assertions. The first is that even under a business paradigm that gives absolute primacy to the interests of shareholders, the fundamental economic objective of a listed company is not and has never been to simply maximise shareholder value or to create shareholder wealth per se. It is to build an organisation that can create wealth for shareholders on an ongoing basis. The second assertion is that the only way to do this is to embrace customer value creation and shareholder wealth creation as joint and mutually reinforcing objectives, and to then pursue these two joint goals in tandem, in a structured and systematic manner.

Denis Kilroy, Marvin Schneider

The Understanding

Frontmatter

2. Some Important Truths

Abstract

The purpose of this chapter is to make explicit some important truths – particularly in relation to listed company performance measurement and how performance in the market for a company’s products and services, can be aligned with the capital market outcomes experienced by shareholders.

Denis Kilroy, Marvin Schneider

3. A Bow Wave of Expected Economic Profits

Abstract

In Chapter 2, we established that the economic return on market value (TSR-Ke) is the fundamental determinant of whether or not wealth has been created for shareholders over a specified measurement period. We also established that (all else being equal), TSR-Ke will be positive if a company takes action that the capital market expects will enable it to deliver an economic profit stream greater than it was expecting at the beginning of a measurement period. In this chapter, we will develop these concepts a good deal further. In doing so, we will demonstrate why the use of economic performance measures is so helpful when setting out to build a truly great company with the ability to prosper well into the future. We will also demonstrate why short-termism – or the pursuit of short-term financial performance at the expense of longer-term value creation – makes no sense at all.

Denis Kilroy, Marvin Schneider

4. Two Joint and Mutually Reinforcing Objectives

Abstract

In Chapter 3, we introduced three new concepts that in combination constitute what we call The EP Uplift + TSR Alpha Construct. The first was the notion of a Bow Wave of Expected Economic Profit that underpins the share price and market capitalisation of every listed company at every point in time. The second was the idea of a Pair of Economic Profit Bow Waves that could be used to quantify the extent to which a company had created shareholder wealth by either exceeding market expectations over a given measurement period, or by convincing the capital market that it had developed the ability to do so at some point beyond the measurement period. The third was the concept of TSR Alpha, which in combination with the Pair of EP Bow Waves, enabled us to link performance either delivered or expected in the market for a company’s products and services, with the capital market outcomes experienced by shareholders. In this chapter, we will take the thinking one step further by introducing the notion of customer value and shareholder wealth creation as joint and mutually reinforcing objectives in the pursuit of ongoing intrinsic value uplift.

Denis Kilroy, Marvin Schneider

5. Creative Thinking and the Value Creation Mindset

Abstract

This chapter describes the type of mindset required in order to succeed in creating value for customers and wealth for shareholders on an ongoing basis, and in building an organisation with the capability to do so. Some examples of the very positive outcomes that stem from the establishment and application of such a mindset are provided in Part III

Denis Kilroy, Marvin Schneider

The Response

Frontmatter

6. An Overview of the Journey

Abstract

The journey that will be outlined in this chapter and then developed further in Chapters 7, 8, 9 and 10, is focused on the development of a series of capabilities underpinned by a philosophy that sees business as an opportunity to serve society, rather than an opportunity to exploit it.

Denis Kilroy, Marvin Schneider

7. Valuing the Current Strategy

Abstract

The primary purpose of a current strategy valuation is to determine where a business is creating value, where it is destroying value, and why, under the strategy currently being pursued. It is completed at a disaggregated level, and when done at a customer segment level, provides both a starting point from which to pursue, and a datum or benchmark against which to compare, potentially higher value alternative strategies.

Denis Kilroy, Marvin Schneider

8. The Systematic Pursuit of Higher Value Strategies

Abstract

A higher value strategy is a strategy that, if implemented successfully, will create shareholder wealth by producing a higher intrinsic value outcome for a business than if it continued to pursue its current strategy. By definition, such a strategy will have a higher expected economic profit stream than the current strategy. In this chapter, we provide comprehensive guidance on the systematic pursuit of ongoing value uplift through higher value strategy development.

Denis Kilroy, Marvin Schneider

9. Customer Value, Shareholder Wealth and Stakeholder Wellbeing

Abstract

Chapter 8 demonstrated how with the right mindset, a disciplined approach to innovation can underpin the ongoing creation of both customer value and shareholder wealth for a listed company. However just below the surface of this thinking is another important consideration. Once customer value creation and shareholder wealth creation are embraced as joint and mutually reinforcing objectives, business leaders can (if they want) make a conscious choice to pursue these two joint goals in ways that either preserve or enhance the wellbeing of all legitimate stakeholders. These include employees, suppliers, the wider community and the environment. Choosing to act in this way is somewhat analogous to an institutional investor choosing to invest in socially responsible companies. This chapter provides guidance for those leaders of listed companies who wish to move in this direction.

Denis Kilroy, Marvin Schneider

10. Building an Enduring Institution

Abstract

With a clear intention and real commitment, it is entirely feasible to build an enduring institution that can create value for customers and wealth for shareholders on an ongoing basis. It is also possible that if desired, a similar outcome can be achieved in a way that also enhances the wellbeing of all legitimate stakeholders including the wider community and the environment. This chapter describes the primary components involved in building an enduring instituion of this nature.

Denis Kilroy, Marvin Schneider

The Legacy

Frontmatter

11. An Organisation that Prospers Well into the Future

Abstract

The legacy of good business leadership is an institution that not only outlives the tenure of the current board and executive leadership team, but which prospers well into the future as a result of the decisions taken and capabilities established during their tenure. The most fundamental challenge facing every listed company board and executive team is to build such an institution – and to deliver significant benefits to both its customers and its shareholders along the way. In this chapter, we describe the characteristics of such an institution.

Denis Kilroy, Marvin Schneider

12. Conclusion

Abstract

In conclusion, we felt it appropriate to reflect on two questions. 1. Why hasn’t the business community already made more progress towards embracing a more socially responsible business paradigm? 2. Where does the thinking presented in this book fit in the context of the other streams of thought that have emerged post the GFC in an effort to encourage more socially responsible business behaviour? We also provide some commentary in relation to a potential reinterpretation of the economic aspects of the fiduciary duties of directors in the light of the new thinking presented in this book.

Denis Kilroy, Marvin Schneider

Backmatter

Titel: Customer Value, Shareholder Wealth, Community Wellbeing
verfasst von: Denis Kilroy
Marvin Schneider
Copyright-Jahr: 2017
Verlag: Springer International Publishing
Electronic ISBN: 978-3-319-54774-9
Print ISBN: 978-3-319-54773-2
DOI: https://doi.org/10.1007/978-3-319-54774-9

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