By: Harry M. Jansen Kraemer Jr.
Shareholder value is one of those terms that everyone seems to kick around.
Many executives like to say, “We are creating shareholder value,” but what exactly does that mean?
Some use the term shareholder value rather broadly, encompassing a variety of targets and mile-stones; others might use it to describe being the market leader in a particular industry or niche, or hitting a particular financial goal (e.g., becoming a $1 billion company generating a certain amount of net earnings).
While all those goals can be attractive as they relate to the growth of the company, in and of themselves they do not reflect shareholder value.
A company can boast that it has grown from $100 million to $200 million in revenue, or that it increased its earnings per share from $1.50 to $1.80, but that does not necessarily mean it is creating shareholder value.
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About the Author:
Harry M. Jansen Kraemer Jr. is a professor of management and strategy at Northwestern University’s Kellogg School of Management. He is the former chairman and chief executive officer of Baxter International Inc., a multibillion-dollar global health care company, and the author of From Values to Action.
For more information, please visit www.harrykraemer.org.
Credit for the excerpt:
Becoming the Best: Build a World-Class Organization Through Values-Based Leadership.
Copyright © 2015 by Harry M. Kraemer. Reprinted with permission of Wiley.
By Harry M. Kraemer
Published by: Jossey-Bass (An imprint of Wiley)
February 2015; 224 pages; Hardcover