Shareholder Value Approach

The shareholder value approach is based on three postulates: 1. Companies should make an economically correct calculation when evaluating projects, measures and periods and use the DCF method for this purpose. 2. Management should, without exception, strive to create value; other goals are subordinate to it. 3. Due to the nature of the company, shareholders are solely entitled to the residual.

First: Companies and their parts (divisions, product areas, projects) should be valued using the present value of the free cash flows expected on the basis of the business plan. Use of the DCF method. The advantageousness of entrepreneurial measures (such as reorganization, company expansion, investment projects) is assessed by discounting the changes in free cash flows caused by them. If the present value of the business venture is positive, it is considered beneficial. The company's profit for the period is calculated by comparing the value (DCF) at the beginning and the DCF at the end of the period.

Second, a normative requirement The company, represented by the management, should increase the DCF and not pursue any other goals. In particular, management should not take any measures with a negative present value of the expected free cash flows. The management should sell parts of the company if sales proceeds can be achieved that exceed the present value of the expected free cash flows if the company continues as a going concern.

Third: A distribution policy perspective: Shareholders have a claim to the residual: they own the entire company, provided they pay off the debts. All other factors that contribute to the company are remunerated in line with the market and are therefore not allowed to raise any further claims.
The shareholder value approach was originally developed from a criticism of classic corporate management with an orientation towards balance sheet profit figures and a little reflected orientation towards securing the company's continued existence. Here, the shareholder value approach has contributed to the fact that corporate policy decisions by management are increasingly less arbitrary and discretionary, but are increasingly justified according to objective, external standards of at least one stakeholder group.

The normative foundation of the postulate of maximizing shareholder value as a guideline for corporate policy is based on an analysis of social interaction, which is characterized by perfect and complete markets. The normative justification of the approach is controversial insofar as many markets cannot in reality be viewed as perfect and complete.

Hier wird dann wieder die Bedeutung auch anderer Anspruchsgruppen im Rahmen eines Stakeholder-Value-Ansatz gefordert. Im Vergleich zum Shareholder value Ansatz erscheint hier momentan jedoch kein vergleichbar ausgereiftes Entscheidungsinstrumentarium zu existieren, wenngleich Prozesse in Form von Verfahren der Mediation und des allgemeinen politischen Prozesses zur Verfügung zu stehen.

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