With the gradual improvement of the market economy, the importance of shareholder value is becoming more and more obvious.On the one hand, it is to inspect the company's performance and establishexcitation mechanismOn the other hand, it is also an important basis for the market of shareholder control, and even to some extent, it also hassocial security system It has positive significance to improve.becausestock rightThe increasing popularity of socialization and the realization of shareholder value itself, to a large extent, is an increase in the value of the whole society.Shareholder values emphasize rational attention to shareholder values, and advocate unilateral shareholder ledCorporate governance structure, this pair fromproperty rightIt is of great practical significance to solve the problems existing in the reform of state-owned enterprises.
Ten Principles
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It is the tradition of American enterprises to pursue the maximization of shareholder value.But after entering the new century, EnronWorldComAnd a series of accounting scandals of large companiesequity marketThe sharp decline in the public trust and the continuous decline in the public trust have led people to target the target of condemnation at the "maximization of shareholder value"corporate governance principle.Indeed, one of the biggest problems brought by the crazy pursuit of shareholder value is: the companycontrollerAnd investors pay too much attention to the current performance, rather than investing in the long-term development of the company, sometimes even for short-term interestsuse unscrupulous divisive tactics, such as doingFalse account。
however,Alfred RappaportNot a shareholderValue principleThe management failed, but the management betrayed this principle.For example, in the 1990s, various companiespayIntroduced inthe stock option, originally intended toshareholderAre linked together.But in fact, these free giftsoptionThere are major defects in the design, which not only basically do not motivate managers to take actions conducive to creating value, but also produce the opposite result.Because the waiting period of stock options is generally short -- three to four years, plus executives believe that short-term earnings can stimulateStock priceRise, which encourages them to manipulate earnings, exercise options early, and cash out shares early.in other words,controllerIt serves the interests of one's own rather than the long-term interests of shareholders.
The research shows that since the stock price reflects the long-term view of the market on stocks, to prove the rationality of the company's stock price, the management needs to ensure that the company can create value in more than 10 yearscash flow 。In other words, no matter how many long-term shareholders are, the management should pursue the maximization of long-term value.The key is how to let the company actually create value.
Based on his research and decades of consulting experience, Alfred Rappaport summed up 10 basic principles to help enterprises create maximum value.
Principle 1 is: Do not manipulate earnings or conduct earnings guidance.If the first principle is not followed, nine out of ten companies will not follow the remaining principles.If managers play accounting tricks to raise short-term earnings, even ifYieldlower thancapital cost They also need to invest, or give up investment opportunities that can create value. Although they can enjoy the benefits in the short term, they will one day be unable to meet the market expectations that have been raised higher and higher, and will be severely punished by the market.
Principles 2, 3 and 4 point out that executives are making strategic decisionsbuyDecisions andassetsWhen making a choice, the company shallExpected valueThe maximum of is the judgment standard, even if it may reduce the company's recent earnings.When there is no reliable investment opportunity that can create value in front of the company, the company should avoid investing excess cash into projects that look good but actually damage value, such as the company does not need to make unwise and overpriced acquisitions.Principle 5 suggests that if there is no good investment opportunity, cash should be useddividendandRepurchase of sharesIn the form ofshareholder。
Principles 6, 7 and 8 refer to high-level, middle level andGrass roots managersOfpayThe design provides guidelines and proposesDiscount Index Option Plan、Discount equity risk option plan、Shareholder value appreciation、Leading value indicatorsAnd other concepts to reward managers for their behaviors focusing on long-term value.Principle 9 emphasizes that senior executives should bear the same risk as shareholders, and the recommended approach is to extend senior executivesexercise The holding period of the shares acquired later;When judging whether the number of shares held by an executive meets the minimumownershipWhen horizontal, setRestricted stockExcluded.Principle 10 urges the company to disclose all information related to value to investors, which can ease the company's management's addiction to short-term earnings, and reduce the uncertainty faced by investors, thus potentially reducing the cost of capital and increasing share prices.
Alfred Rappaport also noted that there are a few types of companies, such as high-tech companies that are just starting up and companies that are severely restricted by capital, and they cannot ignore the pressure of the market on short-term performance.But most companies can use these 10 principles to better exert their potential to create shareholder value.Alfred Rappaport calls the company that abides by all these 10 principles "the tenth level" company.At present, onlyWarren BuffettLeadedBerkshire HathawayClosest to this level.
misunderstanding
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In the 1990s, the concept of shareholder value was deeply rooted in the hearts of the people: companies focused all their energy on pleasing shareholders, so their share prices soared.
However, this has not been the case for some time.Even if you includeequity marketcurrentrebound, since the new millenniumS&P 500 IndexTotal ofRate of returnIt's always negative.The collapse of Enron and WorldCom in this decade (and many other minor collapses) was due to the eagerness to please shareholders.
Recently, several of our top financial institutions have imploded, because the executives of these institutions believe that it is their mission to pursue higher returns for shareholders.The situation was so bad that evenJack Welch (Jack Welch）A few months ago, he also stood out and said that this was "the stupidest idea in the world" (heGETenure can also be summarized as pursuing shareholder value).
Is Jack right?Is this really a stupid idea?It depends on how you understand its meaning.In 1981,Harvard Business ReviewAn article by Alfred Rappaport, an accounting professor, introduced a term to the world. He tried to construct a "theoretically complete and practically feasible" model for operating enterprises, so that“shareholderTo maximize its economic value.
His goal is to make the company's management pay less attention toBook profitFirst, but mainly focus onEconomic profitThat is, the cost of capital discounting the expected future cash flow.His theory requires not to overemphasize quarterly profits, but to focus on creating long-term value.That doesn't sound stupid.
Rappaport, 77, is semi retired and still gives《Harvard Business Review》I am writing some articles and a new book.He said: "I don't know how many times I have said: long-term, long-term, long-term. For me, shareholder value is not an immediate increase in share prices."
However, this is exactly what happened in the 1990s.Those who abide by shareholdersValue Disciplines OfCEOWe're trying to pleaseequity marketI fell down in the process.They are struggling to reach their quarterly profit target, which in turn reduces the value of the company.
Efficient market theoryBorn in the 1960sUniversity of Chicago GSB The view that prevailed in the 1990s isstock marketOfpriceYes.IfStock priceYes, so maximizing shareholder value is the simplest thing in the world.DeceasedUniversity of ChicagoFamous financial scholarMerton Miller (Merton Miller）In 1993, he said: "It may be short-sighted to focus on the recent earnings, but not on the stock price, because the stock price reflects not only the current earnings, but also the earnings expected by the market in the future years."
Stock prices do reflect future expectations, but after decades of research, we now know that stock prices also reflect too many other things: emotions, errors, andfund managementImproper incentives in the industry.Rappaport said,equity market"There are a lot of error messages in the short term".As a result, for those who pursue long-term shareholder value, the stock price is basically a useless reference roadmap.
So, is shareholder value a stupid concept?No, but it is difficult to understand, because to understand it correctly, you need to ignore your shareholders.
