The Shareholder Value and Stakeholder Discussion: An International Overview

Abstract

Although there is more than one definition of the shareholder value approach it is commonly accepted that it has importance mainly in two areas:¹ first, as a norm in financial management . this means that management has to align company policy with the financial goals of the shareholders; second, it is a method of value-orientated company planning. The concepts, therefore, are based on the capital-market-related discounted cash flow method.² Alternative company strategies have to be measured and compared according to the present values of future cash flows. Thus, shareholder value analysis has become a valuable instrument of strategy assessment. As far as can be seen there are no objections to the latter point. However, the former, the demand that the management concentrate primarily or exclusively on maximizing the wealth of the company’s shareholders, meets criticism, especially from voices outside the Anglo-Saxon cultural environment. They argue that it should not be a company’s exclusive target to increase dividends and ensure higher stock exchange prices, even if it has to be accepted that the shareholders are the direct risk-takers of a company; there are obviously more target groups who are affected by and interested in the well-being of a company:

• the suppliers, who aim at having steady sales;

• the customers, who want permanent, high quality goods and services purchased at reasonable prices;

• the credit institutions, who grant loans and exert influence in the interest of the company’s security and its ability to pay principal and interest;