For Better Corporate Governance, a Shareholder Value Review

Abstract

A Shareholder Value Review (SVR) is proposed as the best way for boards of directors to explain to shareholders how management's performance in maximizing shareholder value is monitored by the board. If the SEC would require boards to do an SVR, that would motivate both management and the board to select and use an explicit valuation model. The life-cycle model, used in various forms in the money management industry, would likely be the model of choice for SVR implementation. Increased attention by both management and boards to how financial performance connects to shareholder value would lead to a common valuation language and useful dialogue with investors, proponents of accounting reform, and accounting rule-makers.

Keywords: Corporate Governance, Shareholder Value Review, Life Cycle Valuation Model, CFROI