1. Introduction 1.1 Objective of the assignment 1.2 Structure of assignment 2. Background of the assignment The assignment is based on the research of Keppel Corporation. Keppel Corporation is one of the largest conglomerates in Singapore and one of the world’s largest builders of offshore oilrigs. The Keppel Group of Companies includes Keppel Offshore & Marine, Keppel Infrastructure, Keppel Telecommunications & Transportation (Keppel T&T) and Keppel Land, among others. 3. Concept of Shareholder Value Maximisation 3.1 Concepts: In recent years, shareholder value’s creation becomes a very popular topic among top management. They think through creating shareholder value strategy, companies can gain large profits from it. But many of them misunderstand this concept. Shareholder value maximization is a kind of strategy for a long-term business operation. Totally different from maximizing profit, shareholder value maximization focus on identifying growth opportunities and building competitive advantage. So shareholder value maximization punishes short-term strategies that destroy assets and fail to capitalize on the company’s core capabilities. There was a version of definition to define the shareholder value that the value delivered to shareholders because of management’s ability to grow earnings, dividends and share price. In other words, shareholder value is the sum of all strategic decisions that affect the firm’s ability to efficiently increase the amount of free cash flow over time. Theo Vermaelen, Professor of Finance at INSEAD argued that shareholder value is defined as the present value of free cash flows from now until infinity, discounted at a rate that reflects the risks of these cash flows, therefore, maximizing shareholder value is not the same thing as maximizing short-term profits, earnings per share or manipulating stock prices through accounting fraud. This is a mainstream opinion for most of experts in the world. But these arguments mostly concentrate more on what will shareholder value maximization bring to us? They ignore the definition on the premise of “who are shareholders”. Many writers also have pointed out that a company has social and environmental responsibilities and that shareholders are not the only stakeholders in the business. These experts argued that some groups outside of stakeholders are also having long-term interests and relationships with a company. These are groups that mentioned as employees, customers, managers, suppliers and community. As we listed, almost all kinds of people relate to a company impact share price. So in that case, in the long term, shareholder value is the best strategy for all stakeholders. But it depends on the way managers create shareholder value. On the other hand, all shareholders are also very vulnerable in a short-run business due to a non-sustainable resources control. But in practice, managers who insist shareholder value maximization are always over-concentrated on the words of “maximization”. Sometimes, when ethical problem were met, some managers even know what is wrong to social responsibility, they have to make more profits for stakeholders. And in businesses, entrepreneurs commonly consider this term as: managers try to gain the maximized profits to increase their companies share price by whatever ways can be done.
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