VBM Thought Leader: Alfred Rappaport
Creating Shareholder Value
The New Standard for Business Performance
About Alfred Rappaport: biography / resume / curriculum vitae
Dr Alfred Rappaport,
the Leonard Spacek Professor Emeritus of J. L. Kellogg Graduate School of
Management at Northwestern University, developed the idea for the
Shareholder Scoreboard, published annually by the Wall Street Journal. He is
co-founder and former Chairman of the Board of the Alcar Group Inc., whose
consulting and education practices are now part of the
LEK/Alcar Consulting Group, LLC, the U.S. operation of a worldwide strategy consulting firm. He
has been a guest columnist for The Wall Street Journal, The New York Times,
and Business Week, and lives in La Jolla, California.
Creating Shareholder Value - The
new Standard for Business Performance
classic book on Corporate Strategy in relation to creating shareholder value
(1986). A true classic on Shareholder Value and Value Based Management, that
remains very worthwhile to read even today.
Alfred Rappaport is
one of the founders of the creating shareholder value mindset, which gained
importance in the '80s and still growing and increasingly accepted
worldwide. Rappaport also Co-founded L.E.K. Consulting. According to
Rappaport given that investors increasingly value bonds by discounting
future cash flows, it stands to reason that they value stocks in the same
Rappaport starts the
book explaining that objections to using a Discounted Cash Flow model
hold. Strong arguments and empirical evidence is given to explain the
market's valuation mechanism.
What follows is a
basic but thorough explanation of the 3 elements for valuing a company (cash
flows, risk and the
competitive advantage period).
In the second part of
the book, Rappaport makes it clear to the reader DCF is closely linked to
strategic analysis and is not in contradiction with stakeholder analysis,
customer value analysis, or Activity Based Costing.
On the contrary,
Rappaport shows DCF can also be used as a
communication tool, that helps
investors understand a company's implied performance and how to (re)act.
Creating Shareholder Value - The new Standard for Business Performance is a true achievement in human thinking; like
classical music, creating shareholder value from Alfred Rappaport will forever remain an excellent piece of art.