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Shareholder value the only true measure of success

Friday 8th December 2000

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There are many widely used methods of assessment that rank a company's performance, from traditional financial measures such as profit and return on equity, through to more loosely defined notions such as quality and customer service. However the real test of performance for listed companies is simply the return they have delivered to the people that invest in them. This measure encompasses all aspects of a company's performance, as no company can reward its shareholders well in the long term without also satisfying other important stakeholders such as customers and employees.

In 1996, the National Business Review and the international strategy consulting firm L.E.K. Consulting developed the Shareholder Scorecard. The Scorecard is now the keystone in performance measurement for listed Australasian companies. Future investment in New Zealand and Australian corporates is dependent on their delivering acceptable returns to shareholders.

Growth in share price is often used as a guide to the rate of return to shareholders, but this can be misleading as investors receive returns in a number of other ways, including:

  • dividends
  • imputation credits
  • simple capital transactions, such as rights issues
  • complex capital changes

The Shareholder Scorecard takes an investor's perspective to assessing the performance of Australasia's listed companies. It ranks the companies according to the total return to their shareholders, including both share price growth and dividends, known as Shareholder Rate of Return (SROR). The Scorecard is, therefore, more than just a ranking of share price performance it is a true comparison of the relative financial performance of the companies. It also provides the basis of a framework to help managers improve future returns to shareholders.

The Scorecard has been compiled using data from the New Zealand Stock Exchange and Datastream. It examines returns over various periods between July 1990 and June 2000, and includes all companies listed on June 30 2000, which have been listed for at least one year. Companies have been divided into the Australian (Top 100) and New Zealand (Top 40) markets. Full lists, by industry, for the New Zealand and Australian markets are available from the L.E.K. Consulting website,

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