Means of Company's Driving Superior Shareholder Value Coursework

Means of Company's Driving Superior Shareholder Value - Coursework Example I introduced the balanced scorecard which is a performance report based on a broad set of both financial and non-financial performance measures as the best strategic management accounting tool to be employed in the current business environment today. I also focused a bit on how shareholders could align their interests with those of shareholders since present compensation plans such as the granting of stock options to CEOs have been unable to motivate managers to create value for shareholders. I therefore recommended that managers should be compensated based on the amount of shareholder value that they generate and that it is also necessary for managers to be evaluated based on the amount of long-term economic value that they generate since evaluating them based on short-term performance measures can make them be myopic and as a result engage in short-term activities to generate higher short-term results for the short-term financial performance measures.Today, the current business env ironment has become characterized by the importance of the investor and the drive for shareholder value. Shareholder value is the value of a firm minus future claims (debt). Shareholder value is given by taking the net present value (NPV) of all future free cash flows to the firm plus value of non-operating assets minus future claims (debt). Non-operating assets include marketable securities, excess real estate and over-funded pension plans, whereas future claims include interest bearing long-term and short-term debt, capital lease obligations, under-funded pension plans and contingent liabilities. Only when a firm earns a return on invested capital (ROIC) above the cost of capital can that firm be said to be creating economic shareholder value.  Ã‚