Ten Ways To Create Sharholders Value Alfred Rappaport

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A R T I C L E www.hbr.org Ten Ways to Create
Shareholder Value by Alfred Rappaport

Included with this full-text Harvard Business Review article:
1 Article Summary
The Idea in Brief—the core idea
The Idea in Practice—putting the idea to work
2 Ten Ways to Create Shareholder Value
13 Further Reading
A list of related materials, with annotations to guide further exploration of the article’s ideas and applications

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Ten Ways to Create Shareholder Value

The Idea in Brief

The Idea in Practice

Many firms sacrifice sustained growth for
short-term
…show more content…
Standard stock options diminish long-term motivation, since many executives cash out early. Instead, use discount indexed options.
These options reward executives only if shares outperform a stock index of the company’s peers, not simply because the market as a whole is rising.

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Companies profess devotion to shareholder value but rarely follow the practices that maximize it. What will it take to make your company a level 10 value creator?

Ten Ways to Create
Shareholder Value

COPYRIGHT © 2006 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.

by Alfred Rappaport

It’s become fashionable to blame the pursuit of shareholder value for the ills besetting corporate America: managers and investors obsessed with next quarter’s results, failure to invest in long-term growth, and even the accounting scandals that have grabbed headlines. When executives destroy the value they are supposed to be creating, they almost always claim that stock market pressure made them do it.
The reality is that the shareholder value principle has not failed management; rather, it is management that has betrayed the principle. In the 1990s, for example, many companies introduced stock options as a major component of executive compensation. The idea was to align

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