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 returns-

dividends 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.