Sharechat Logo

Shareholder value the only true measure of success

Friday 8th December 2000

Text too small?
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, www.lek.com.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Vital proceeds with $37m first stage of Wakefield Hospital redevelopment
Risks from exploration ban coming to pass
Pushpay lifts annual earnings guidance; shares rise
Treasury mindful of gaps in living standards framework
Cannasouth slumps on debut as investors back blue-chips
Zespri signals profit growth, trims expected fruit and services payment
Wider annual current account deficit meets expectations
Wider annual current account deficit meets expectations
19th June 2019 Morning Report
NZ dollar firms on signs US-China trade talks moving forward

IRG See IRG research reports