1. The RoleoftheConceptof Shareholder Value in theContextof Value Based Corporate Management Dr. Dieter Weinmann Heidelberg, 19.03.2010

2. Agenda The Conceptof Shareholder Value Value BasedCoporate Management Shareholder Value ConceptandValue Based Management 2 Dieter Weinmann

3. Agenda The Conceptof Shareholder Value Value BasedCoporate Management Shareholder Value ConceptandValue Based Management 3 Dieter Weinmann

4. Shareholder Value - I Is an indicatorfor all futurepaymentsof a companyinvestment Is the Value ofonesharemultipliedwiththeamountofshares Is the Value ofthe Company Are theexpecteddividendsofthecompanyfor all shares 4 Dieter Weinmann

5. Shareholder Value - II Ifcapitalmarketsareefficient, Investors chooseeitherthoseshares, thatprovidethehighestreturnwhenhavingthe same riskclassorthoseshares, thatprovidethelowestriskwhenhavingthe same return rate. So itisclear, that an investorchoosesthoseshares, fromwhichthehighestaccumulatedpayments in thefuturecanbeexpected. 5 Dieter Weinmann

6. Shareholder Value III(Alfred Rappaport, 1995) Dieter Weinmann 6 Gaining Value/ Shareholder Value Internal/ external Share-Stakeholder Value benefit Target Net Cash-Flow Discount Rate Capital structure Valuation Field Capital Costs Capital assets Sales growth, Profit margin, Tax Rate Prognosis horizon Value Generator Business internal/ external Investments Financing SteeringPossibilities

7. Agenda The Conceptof Shareholder Value Value BasedCoporate Management Shareholder Value ConceptandValue Based Management 7 Dieter Weinmann

8. Value BasedCoporate ManagementStakeholder The Stakeholderof a companyarethe Management andtheinvestors/capitalprovider In thepasttheexternalshareholders/ stakeholderswantedthemanagmenttomaximizethesharevalue 8 Dieter Weinmann

9. Value BasedCoporate ManagementMotivation ofthe Management The Owner(-Group) of a companyisinterested in keepingthecompanyalive Ifpaidwith a fix salary, theManagement isinterested in satisfyingtheirownprefences, but theownersareinterested in maximizingtheprofit  Principal-Agent-Theory 9 Dieter Weinmann

10. Principal-Agent-Theory Ownership and Management isseparated Owner(-Group) is/arethePrincipal Management isthe Agent Usuallythe Agent has an Information-Advantage, because he/shehas a deeperinsightintothecompany Becauseeverybodymaximizeshis/her ownutility, itislikely, thattheagentactsagainsttheinterestsofthePrincipal  Thisiscalled „Moral Hazard“ 10 Dieter Weinmann

11. Value Analysis for Corporate Restructuring Dieter Weinmann 11 0,5 -1 3 2,5

12. Agenda The Conceptof Shareholder Value Value BasedCoporate Management Shareholder Value ConceptandValue Based Management 12 Dieter Weinmann

13. Shareholder Value ConceptandValue based Corporate Management Separating Enterprise Value and Shareholder Value: Forinternalcalculationofthe Enterprise Value, thereismuchmoreinformationavailablethanatthe stock marketforthe shareholder value.  Oftendifferencesbetweeninternalcalculatedvalueand stock marketvalue 13 Dieter Weinmann

15. Problems withthe Motivation forthe Management (Agent), toactliketheownerswouldlikethemto14 Dieter Weinmann

17. The traditional Market Value Methodsexpect, thatthepaymentsofthepast, also last in thefutureand do not considertheenvironmentanddevelopmentofthecompany, whichcouldleadtootherpayments15 Dieter Weinmann

18. ConclusionPro Shareholder Value: SV is a goodtoolforevaluatingstrategies Prerequisites: Righttointeractof Shareholders Rightforinformationof Shareholders Salaryfor Managers correlatedto SV Organizational Model hastobecompatible 16 Dieter Weinmann

19. ConclusionCon Shareholder Value: The Conceptofthe Shareholder Value is not abletopaint a completepictureof a company SV fostersshort-termthinking SV destroystheconsensusbetween Management andEmployees QuotingRappaport, SV isforlong-termstrategies Investments areoftenpaying off in thelongrun, but thenthemanagementhasalreadychanged 17 Dieter Weinmann

20. Thankyou forYour Attention! 18 Dieter Weinmann

21. BackUp Dieter Weinmann 19

23. uncertaintyincreases, withtheamountof time

24. „constant-growth-model“ is also not realistic20 Dieter Weinmann … ?? today

26. Values thataren‘tquantifiable, aren‘tconsideredat all21 Dieter Weinmann

27. Shareholder Value ConceptandValue based Corporate Management Managers aremostlypaid in relationtothe shareholder value. Whatconsequencesaretobeexpected? Goodorbad? 22 Dieter Weinmann

28. Shareholder Value - II Shareholder Value = Total Company Value – Value ofexternalcapital Dividend Discount Model (DDM): = Present Value, Market Value = Discount Percentage = Dividend in period t (including Liquidation in period T) 23 Dieter Weinmann

29. Shareholder Value - III Easy calculationofthe Market Value withthe model of Gomez and Weber: Calculatingwiththe „never-ending“ Operating Free Cash-Flow (OFCF): = never-ending Operating Free Cash-flow = Discount Percentage 24 Dieter Weinmann

31. Netto-investments in assets= Operating Free Cash Flow 25 Dieter Weinmann