10 Ways to Create Shareholder Value
Principle 1:
Do not manage earnings or provide earnings guidance
Principle 2:
Make strategic decisions that maximize expected value,
even at the expense of lowering near-term earnings
Principle 3:
Make acquisitions that maximize expected value,
even at the expense of lowering near-term earnings
Principle 4:
Carry only assets that maximize value
Principle 5:
Return cash to shareholders when there are no credible value-creating opportunities
to invest in the business
Principle 6:
Reward CEOs and other senior executives for delivering superior long-term returns
Principle 7:
Reward operating-unit executives for adding superior multiyear value
Principle 8:
Reward middle managers and frontline employees for delivering superior performance
on the key value drivers that they influence directly
Principle 9:
Require senior executives to bear the risks of ownership just as shareholders do
Principle 10:
Provide investors with value-relevant information
Do not manage earnings or provide earnings guidance
Principle 2:
Make strategic decisions that maximize expected value,
even at the expense of lowering near-term earnings
Principle 3:
Make acquisitions that maximize expected value,
even at the expense of lowering near-term earnings
Principle 4:
Carry only assets that maximize value
Principle 5:
Return cash to shareholders when there are no credible value-creating opportunities
to invest in the business
Principle 6:
Reward CEOs and other senior executives for delivering superior long-term returns
Principle 7:
Reward operating-unit executives for adding superior multiyear value
Principle 8:
Reward middle managers and frontline employees for delivering superior performance
on the key value drivers that they influence directly
Principle 9:
Require senior executives to bear the risks of ownership just as shareholders do
Principle 10:
Provide investors with value-relevant information
Source: Alfred Rappaport, Harvard Business Review, September 2006, 66-77
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