Abstract
Subject. The subject of the study is the problem of the possibility of applying the method of economic added value for constructive motivation of the top management of corporations. With the constructive motivation of senior executives, they work in such a way that they do not distort the projected cash flows of projects and the profit indicators of the firm in order to receive appropriate remuneration for that, but solve long-term strategic issues, which allows the company to constantly increase the value of the business.
Goals. The purpose of the study is to adjust the known method of economic added value in such a way that it can be used to successfully motivate top managers of the company. In this case, this method is compared with the method of net present value and the method of modified economic added value in order to bring the interests of top managers in line with the interests of the owners of the firm, for example, shareholders in the joint-stock company.
Methodology. The proposed methodology consists in applying the actual indicator of the modified economic value added instead of the usual economic added value. This allows you to align priorities of top managers and owners (shareholders) with respect to which investment project from a set of available alternatives should be implemented.
Results. The projected modified economic added value, like the net present value, does not in itself provide a reliable guide for the rational motivation of the top manager for the company’s long-term goals. This problem can be solved by placing top managers remuneration in dependence on the actually obtained modified economic added value by years as a result of the implementation of a specific project. In this case, the top managers of the company become constructively motivated to increase the value of the company’s business, as required by shareholders.
Conclusions. The results of the research presented by the authors can be useful to both financial analysts and corporate owners. They will help to focus the work of top managers on achieving long-term strategic goals of companies.
The article was prepared with the financial support of the Russian Foundation for Basic Research. Grant No. 15-02-00102 a.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Kuznetsov, V.P., Trofimov, O.V., Frolov, V.G., Sidorenko, Y.A., Plekhova, Y.O.: Creative tools of raising the competitiveness of business on the basis of intellectual technologies of decision support. In: Communications in Computer and Information Science, vol. 754, pp. 302–316 (2017)
Brigham, E.F., Gapenski, L.C.: Intermediate Financial Management, 4th edn., 1122 p. The Dryden Press, Orlando (1993)
Ivanova, M.O.: Perfection of the compensation structure of labor of top managers of trade networks. J. Creat. Econ. 7, 100–105 (2009)
Kirillova, M.M., Soboleva, E.V.: Peculiarities of motivation of top managers. In: Actual Problems of Modern Science, vol. 1, pp. 75–81 (2013)
Limitovsky, M.A.: Investment Projects and Real Options in Emerging Markets, 527 p. Yurayt, Moscow (2004)
Garina, E., Kuznetsova, S., Semakhin, E., Semenov, S., Sevryukova, A.: Development of national production through integration of machine building enterprises into industrial park structures. Eur. Res. Stud. XVIII, Special Issue: 267–282 (2015)
Damodaran, A.: Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, 993 p. Wiley, New York (2002)
Kruschwitz, L.: Finanzierung und investition, 563 p. R. Oldenbourg Verlag, Munchen (1999)
Mizikovsky, I.E., Bazhenov, A.A., Garin, A.P., Kuznetsova, S.N., Artemeva, M.V.: Basic accounting and planning aspects of the calculation of intra-factory turnover of returnable waste. Int. J. Econ. Perspect. 10(4), 340–345 (2016)
Kuznetsova, S.N., Romanovskaya, E.V., Potashnik, Y.S., Grechkina, N.E., Garin, A.P.: Factors determining whether industrial parks are successful or not. In: Managing Service, Education and Knowledge Management in the Knowledge Economic Era - Proceedings of the Annual International Conference on Management and Technology in Knowledge, Service, Tourism and Hospitality, SERVE 2016 4th., pp. 53–58 (2017)
Yashin, S.N., Koshelev, E.V., Kuptsov, A.V., Podshabyakin, D.V.: Investment Planning of Modernization of the Equipment of the Production Company: Monograph, 201 p. OOO “Printing Workshop RADONEZH”, N. Novgorod (2015)
Pogrebnaya, E.V.: The system of motivation of middle managers and top managers (on the example of a construction company). Leadersh. Manag. 3(2), 113–120 (2016). https://doi.org/10.18334/lim.3.2.35377
Limitovsky, M.A.: Reputation, qualification and motivation as drivers of value. Russ. J. Manag. 7(2), 51–68 (2009)
Yashin, S.N., Trifonov, Y.V., Koshelev, E.V.: Estimation of cost of motivation of top-managers of a corporation on the basis of warrants. Financ. Credit. 11(683), 32–42 (2016)
Brigham, E.F., Houston, J.F.: Fundamentals of Financial Management, 12th edn., 680 p. Gengage Learning, Mason (2009)
Roche, J.: The Value of Nothing: Mastering Business Valuations, 236 p. LES50NS (Publishing) Limited, London (2005)
Voronina, S.V.: Economic added value as a tool for managing the company’s value. In: Economics and Management, vol. 22, pp. 6–10. Vestnik SUSU (2012)
Salmanov, O.N.: Economic added value and discounted cash flow: comparison of cost management methods. Serv. Russ. Abroad 9(47), 82–91 (2013). https://doi.org/10.12737/1851
Shipkova, E.V.: The method of economic added value in the assessment of business. Valuat. Issue 2, 44–52 (2012)
Galevsky, S.G.: Economic added value as a tool for managing the company. Notes Min. Inst. 174, 175–177 (2008)
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 Springer Nature Switzerland AG
About this paper
Cite this paper
Yashin, S.N., Koshelev, E.V., Kuznetsov, V.P., Zakharova, Y.V., Ivanov, A.A. (2019). Contradictions in the Motivation of Top Managers of Corporation by the Method of Economic Added Value. In: Popkova, E. (eds) The Future of the Global Financial System: Downfall or Harmony. ISC 2018. Lecture Notes in Networks and Systems, vol 57. Springer, Cham. https://doi.org/10.1007/978-3-030-00102-5_11
Download citation
DOI: https://doi.org/10.1007/978-3-030-00102-5_11
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-00101-8
Online ISBN: 978-3-030-00102-5
eBook Packages: Intelligent Technologies and RoboticsIntelligent Technologies and Robotics (R0)