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Rich Shareowner, Poor Sshareowner

A CEO’s Review
Rich Shareowner, Poor Shareowner
By Will Marshall

Where do I begin? Well let me state that the book "Rich Shareholder, Poor Shareholder "written by Will Marshall is one of the best business books I have read in the last 25 years. This book is on a par with Kenichi Ohmae’s book "The Mind of the Strategist", a seminal book on strategic planning in business.

The book should be a standard text book for all businessmen, whether in the blue chip multinationals, or enterprising executives and CEOs of start ups, early stage and turnaround small to medium enterprises. (S.M.E.)

The book is not one of those countless, trite, utilitarian treatises on quick successes, how to make a quick buck and how to manipulate people to do your bidding. It is a thoughtful, philosophical read, on a par with Aristotle’s "Ethics", and in many respects follows the Socratic tradition of questioning and answering important points of principles, in this case business, by visualising scenes in Colorado on the Rainbow Trout Ranch. Reminiscent, I believe, of the dialogue between Socrates and his pupils in the "Phaedo". My only reservation is sometimes the loss accuracy in enunciation, which characterises the language of the "Queen’s English", but the Author is American-we’ll forgive him!

The book starts with the statement that businessmen should set about "creating value" in their companies, in the same way people, of all walks of life, should create "Value" in their personal lives. ( Ethics) I believe this to be fundamentally true. Executives of Companies ought to see themselves as trustees to shareholders and customers, whereby they are entrusted with monies to use prudently and wisely for the purposes of generating future "value". This is not dissimilar to us entrusted with the world as we have, to ensure we protect and preserve it for future generations.

Based on my experience with working in top class multinational companies, both in the USA and Europe, as well as European SMEs, many people abuse, do not adhere or more likely than not, lose sight of their "duty of trust". Sometimes this is a reflection of personal failure based on an overriding "ego", short sighted money incentives, and plain old bad practices such as Enron and today’s subprime crises in both the USA and the UK.

There is a raft of good ideas, advice and practical philosophical musings in the book. Chapter 8 with its lesson on cash flow is seminal, may I add a point, which if this is executed correctly, this will also reflect "good customer satisfaction".

Based on my experience, on a worldwide basis, embracing the USA, Asia, Europe and Latin America the ideas outlined in Chapter 11 "Who creates shareholder value" is a clear reminder to executives as to where their duty lies. I consider this chapter to be the most fundamental, but I doubt whether many CEOs and CFOs really comprehend this.

The concept of executives being measured on "Enterprise Value" is, in my opinion, excellent. It takes away the American pre-occupation with the short termism of daily stockmarket share fluctuation. To correlate "Enterprise Value" with one’s own personal investment decisions and practices is extremely valuable advice.

An executive, as a trustee of the shareholders, should be obliged to measure the use of the shareholders monies as if it was his/her own.

There are many points in the book that require detailed consideration. I will highlight three key factors which I think lay the basis for sound practical philosophical thought in the conduct of business.

The first is: "Enterprise value is nothing more than giving a better return than the cost of money". Simple it may appear to be, but how many times have I come across leading and so called experienced financiers and executives who have totally missed this concept. Good executives must keep this in the forefront of their minds.

Secondly, the emphasis on examining the "Enterprise Value" from the point of view of "realistic free cash flow" is significantly important. Oh!! how many times have merger and acquisitions teams overlooked this over the last 20 years? How many, M&A transactions been over valued due to ignorance in avoiding an evaluation of this key point?

Thirdly, the concept of "Valuation Statement" is very clever and innovative. The question is, can the short term mentality, which is so apparent in the American business and political culture, cope with it? The Chinese culture will, I believe, understand this, the future belongs to Asia!! I also believe Europe can cope with this concept; the "Old World" should adopt this as a principle of corporate governance.

The use of the "Scout’s Art" is excellent. Here you see the vision of what it means to think outside the box, to look beyond one’s initial thoughts and assumptions. Easily said, yet not always achieved. The "Scout’s Art" explains why it is important in business life.

It is said that "Humility is the essence of true greatness". As a general note, throughout the book, I detect the essence of humility. Whatever one’s political, philosophical and religious views, the values outlined in the book apply to Christians, Muslims, Hindi, Confucianism, Agnostics and Socialists- they are global. The book is, in my opinion, founded on Socratic thought and principles. The belief that time and life is mortal-temporary-but that the "soul" is all important. Creating "Enterprise Value" transcends time and enriches the lives of mankind.

As an aside, existing, new and aspiring executives should read this book, along with the author’s subsequent book "Money ain’t free". I would also recommend the book is read in conjunction with two other books, Sir Adrian Cadbury’s "Chairmanship and Governorship", as well as the metaphysical work of the German Professor, Josef Pieper "Wisdom and Prudence".

19th of October 2007

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