Although businesses exist to create value for their owners, corporate
executives and managers do not always act to maximize shareholder
value, because of perceived conflicts with other goals. Shareholder
value does not necessarily conflict with good citizenship toward employees,
customers, suppliers, the environment and the local community.
Value-based management strategies have been around as long
as business has existed. At a minimum such a system required (1) the
full support of the top executives; (2) a link between behavior and
compensation; (3) the employees’ understanding of the system; (4) a
capital market focus; and (5) the realization that a VBM metric is only
a measure of success and un-success itself. Value based management
provides an effective process to maximize value in line with the
owners’ and end users’ requirements. Every useful performance metric
attempts to measure changes in shareholder value, this does not
always happen. This paper explores why this is and provides arguments
for their systematic use.

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powered by Business Standard ,August 18.