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The CEO, Strategy, and Shareholder Value: Making the Choices That Maximize Company Performance

The CEO, Strategy, and Shareholder Value: Making the Choices That Maximize Company Performance

Peter Kontes

ISBN: 978-0-470-87592-6

Aug 2010

304 pages



A new look at delivering effective shareholder value from Peter Kontes, a true leader in the world of strategic management

In The CEO, Strategy, and Shareholder Value, Peter Kontes, a true leader in the strategic management field, outlines the key to creating and growing shareholder value. The proper focus, contends Kontes, is in using quantitative measurements as guideposts on the path to success. The book first outlines the basics of the argument Kontes is making. He then briefly covers the five most important areas for business leaders, followed by a more detailed look at each of the focus areas. Finally, Kontes provides readers with a road map to implementing his suggestions.

  • Presents an argument for a more holistic approach to delivering shareholder value
  • Defines and then elaborates a new approach to strategic management
  • Written by a true thought leader in the field, regularly featured in publications such as Fortune and BusinessWeek

Never before have business leaders experienced the kind of tough decisions they are being forced to make as the economy undergoes incredibly rapid shifts. The common sense guide to successful leadership, The CEO, Strategy, and Shareholder Value delivers exactly the kind of solid, dynamic advice that will keep your organization moving on an upward path.

Preface xi

Acknowledgments xv

Introduction xvii

Chapter 1: Foundations 1

The Purpose of Strategy 2

The Role of the CEO 4

Five Choices That Shape Strategy 6

A Strategic Management Framework 9

Chapter 2: The Economics of Strategic Management 11

Economic Profit 11

Economic Profit and Strategy Valuation 13

The Financial Drivers of Economic Profit and Equity Value 15

The Strategic Drivers of Economic Profit and Equity Value 17

Dealing with Mythology 23

Chapter Summary 29

Chapter 3: Choosing the Right Performance Objectives 31

Aspirations 32

Business Unit Objectives 34

Company Objectives 39

The Tyranny of Top-Down Targets 39

Chapter Summary 46

Chapter 4: Making the Right Participation Choices 49

General Considerations 50

Assessing Participation Opportunities 51

Offering Choices 63

Geographic Market Choices 67

Customer Segment Choices 72

Corporate Participation Choices 75

Chapter Summary 82

Chapter 5: Making the Right Positioning Choices 85

Positioning Choices and Competitive Advantage 86

Business Models 88

Execution Capabilities 107

Corporate Positioning Choices 111

Chapter Summary 122

Chapter 6: Making the Right Organizational Choices 125

The Institutional Imperative 126

Governance Practices 128

Executive Processes 134

Executive Capabilities 151

Chapter Summary 155

Chapter 7: Making the Right Risk Management Choices 157

Clarifying ""Risk"" 158

Setting Risk Thresholds 160

Portfolio Choices 162

Balance Sheet Choices 166

Ethical Choices 174

Chapter Summary 181

Chapter 8: Making It Work 183

Conditions Conducive to Success 183

Priorities for Change 189

The Prize 195

Chapter Summary 198

Appendix I: Economic Profit Growth, Earnings Growth, and Total Shareholder Returns 201

The Data 201

The Analysis 202

Discussion of the Results 204

Appendix II: Economic Profit and Equity Value 207

Valuation Models 207

Maximizing Economic Profit Growth versus Maximizing Equity Value 209

Valuation Issues 210

Appendix III: Economic Profit and Equity Value: Illustration 213

Appendix IV: Reconsidering the Corporate Center 215

The Need for Change 215

Creating a New Model of the Center 217

Conclusion 221

Appendix V: CEO Pay Practices: An Alternative 223

Typical Package 224

An Alternative Approach 224

Illustrative Compensation Plan 226

Alerting The Board Early and Often 229

Notes 231

Index 239