1、PDF外文：http:/ 外文原文 原文一 ： Performance Evaluation, Economic Value Added And Managerial Behaviour For the past two decades many countries started transforming their economies from traditional protected ones to those of more liberalized, globalized and market driven. This period has also seen
2、 the economies becoming more knowledge oriented and Human Resources started assuming more prominence in the growth of the economies and businesses posing a greater challenge for companies to acquire and retain talented workforce (especially at the strategic & managerial levels). The knowledge ec
3、onomy also started witnessing the rapid rise of the agency problem-conflict of interest between managers and owners. So it is very essential to align the interests of the mangers and shareholders or at least reduce the difference between them. In this regard Economic Value Added has been seen as bet
4、ter alternative to the stock price and traditional performance measures. While successful EVA stories in the west are quite encouraging, Corporate India is slowly catching up the EVA adoption. Although not a panacea, EVA based compensation plans will drive managers employ a firms assets more product
5、ively and EVA should help reduce the difference in the interests of the managers and shareholders, if not perfectly align them. 1. Introduction For the past two decades many countries started transforming their economies from traditional protected ones to those of more liberalized, globalised and ma
6、rket driven . This period has also seen the economies becoming more knowledge oriented and Human Resources started assuming more prominence in the growth of the economies and businesses. But this has also posed a greater challenge for companies to acquire and retain talented workforce (especially at
7、 the strategic & managerial levels). The knowledge economy also started witnessing the rapid rise of the agency problem- conflict of interest between managers and owners. The managers in their role as the agents are expected to act in the best interests of the shareholders (principals). Ma
8、nagers will act in shareholders interests only if they have right incentives. So it is very essential to align the interests of the mangers and shareholders or at least reduce the difference between them. So we need a measure that on one hand rightly measures the managerial performance so that he ma
9、nagers with talent and greater mobility- can be suitably compensated (and hence retained) and on the other aligns the interests of the mangers and shareholders. For some time now Stock Price was thought to be an ideal measure achieving the above objectives. However stock price has many limita
10、tions. We shall discuss the pitfalls of stock price as a performance measure before evaluating some of the traditional performance measures and then introduce Economic Value Added as the right measure of managerial performance. 2. Traditional Measures of Managerial Performance Shareholders wan
11、t the maximization of stock price (firm value). So can we measure the performance of a manager directly as reflected by the stock price-Reward managers when stock price goes up and punish them if stock prices behave otherwise? This approach has a major limitation. Stock price is driven by so m
12、any factors that escape from the control of managers, making it an inefficient measure of the true influence of the mangers on firms value. Changes in stock price-in the short run at least are not always accurate gauze of management performance due to the presence of randomness and noise (Kang et al
13、, 2002). Tying top management compensation to stock prices raises another difficult issue. The market value of a companys shares reflects investors expectations. The stockholder return depends on how well the company performs relative to expectations. Suppose a company announces the appointment of a
14、n outstanding new manager. The stock price leaps up in anticipation of improved performance. Henceforth, even if the new manager delivers exactly the good performance that investors expected, the stock will earn only a normal average rate of return. In this case a compensation scheme linked to the s
15、tock return would fail to recognize the managers special contribution. An ideal performance measure should ensure that the managers would bear all the consequences of their own actions, but are not exposed to the fluctuations over which they have no control. In search of such a metrictr
16、aditionally-companies are used to capture managerial performance and reward them through the operation based measures like Profits, EPS, ROCE and ROE. However these measures are not free from limitations. An appropriate performance measure should assess how managerial actions affect the firm v
17、alue. For this to happen the performance measure must incorporate at least three things (Irala, 2005). a. the amount of capital invested b. the return earned on the capital and c. cost of capital (WACC) reflecting the risk adjusted required rate of return Is there any measure that incl
18、udes returns, capital employed and the cost of capital employed in its computation? The Stern Stewart & company, a New York City based consulting firm answers this question positively and introduces its Economic Value Added (EVA). 3. What is Economic Value Added? EVA is the Adjusted Net O
19、perating Tax After Tax (ANOPAT) for a period minus the capital charge (the rupee cost of capital) of the investment over that period. EVA can be expressed as EVA = Adjusted Net Operating Profit After Taxes (ANOPAT) - Capital Cost Where ANOPAT = Capital Employed (CE)*ROCE (as ROCE = EBIT (1-T) / CE)
20、Capital Cost = WACCX Capital Employed (CE) Thus EVA = Capital Employed (CE) *ROCE - WACC * Capital Employed EVA = (ROCE - WACC) Capita l Employed Capital is generally measured by book value. WACC is the weighted Average of cost of Equity (generally measured by CAPM) and cost of Debt.
