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FICCI

CE

Wealth creation

It is the financial markets which reward the performance of a company. In the new millennium, the markets will value and reward organizational initiatives that enhance shareholder value, and punish inefficiencies ruthlessly.

FICCI

CE

Wealth creation

The three most important factors that will influence the creation of share holder value are : 1. Performance II. Potential for growth III. Trust the organization enjoys with the shareholders

FICCI

CE

I. Performance

The shareholders normally look for two types of returnsdividends and the appreciation in the market value of the shares. The focus of the organization in this millennium should be to multiply the market value of shares to create shareholder value rather than just distributing dividend.

FICCI

CE

Performance

The most important factor that influences the market value of shares is consistent track record. This not only means that the organization consistently achieves planned revenues and profits, but also exceeds growth expectations of the shareholders.

FICCI

CE

II. Potential for growth

At one time, market capitalization was linked to the physical assets of the company. In the new millennium the intellectual capital will have a direct bearing on market capitalization.

FICCI

CE

III. Potential for growth

For effective growth, the organizations will have to capitalize on the future. They will need the skills to spot an emerging opportunity while it is still emerging. When the things change, as they usually do, the organization should be able to make a mid-course correction.

FICCI

CE

Potential for growth

The evidence of having successfully capitalized on an opportunity or the demonstration of being able to re-align the organization to a new set of market constraint shall affect the market value of the organization in the new millennium.

FICCI

CE

3. Trust

Trust is built over a period of time, but can be lost overnight. Trust has to be built around integrity. Organizations will need a mechanism that will ensure that there are no lapses that erode the trust built over a long period.

FICCI

CE

Trust

Building trust in the new millennium will require ethical corporate governance. The essence of this lies in aligning the interests of management with that of the shareholders, without detriment to the society. This also calls for complete transparency. The organization must provide the shareholders with important information to enable them to take good decisions.