By Mark C. Scott
The only greatest preoccupation of senior administration of any indexed corporation is its institutional traders. CEOs and CFOs on usual spend round forty% in their time facing this team, and the implicit aim of so much administration groups is to maximize percentage rate. but the real affects at the back of activities in percentage fee are poorly understood, and hence many businesses don't do an exceptional activity of dealing with their traders. attaining reasonable worth presents the proper approach instruments and methods for administration to make sure that their company is valued in a manner that appropriately displays its primary, sustainable worthy for the long run. it's a well timed and functional contribution to a subject matter that are supposed to be excessive at the schedule of any senior administration group.
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Extra resources for Achieving Fair Value: How Companies Can Better Manage Their Relationships with Investors
How should companies seeking fair value respond to this situation? Ignore the sell-side analyst community altogether, in the way that companies such as Gillette and HP have proposed? Should they show increasing reluctance to give guidance to analysts on forecasts which will effectively undermine the advantage held by the house analyst? Should they reduce access to the management team? Should they send the signal that they are no longer willing to divert strategy to short-term earnings demands? This might sound principled and strong but, on the whole, none of these responses are practicable.
As a result, the incentive to make an (easy) choice and place the funds into known hands is very strong indeed. This has probably been a signiﬁcant driver of the consolidation of the fund management industry. The recently poor performance of a section of the fund management industry at the time of writing this book, 40% of whom had failed to even reach the index, will almost certainly prompt further consolidation. 5 4 / A C HI E V I N G F A I R VA L U E The challenges of conservatism This has all produced some distinct characteristics amongst some large institutional shareholders which are more important than generic distinctions between assets in terms of understanding investor behaviour.
In the US, the retail investor holds roughly double that amount. There has been much talk of the alleged increasing importance of the retail trader to the fate of the company shareprice. The Internet has given power to the day trader; information is readily available in a way it never was 10 years ago; the retail brokerage industry has expanded quickly; and the level of familiarity with shares has expanded enormously. But, the inﬂuence of the retail investor is usually exaggerated. A large-cap stock may have 10,000 private individuals holding its stock, on average accounting for less than 15% of the equity between them.
Achieving Fair Value: How Companies Can Better Manage Their Relationships with Investors by Mark C. Scott