Decision rules for long-term value creation

Dirk Schoenmaker, Willem Schramade and Reinier De Adelhart Toorop

No 16074, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Future-oriented companies manage for long-term value creation (LTVC) rather than merely for shareholder value or stakeholder value. Managing for LTVC involves managing and balancing several types of value (financial, social and environmental) at the same time, often involving trade-offs. Companies need to have decision rules that help them make investment decisions accordingly. This article derives such decision rules by starting from what is needed for LTVC, and by showing to what extent it differs from shareholder value maximisation only. It also outlines transition pathways for companies that are currently value destructive on one of the dimensions. Finally, it introduces a few simple models that allow for the prioritisation of specific types of value, in line with a company’s purpose.

Keywords: Capital budgeting; Net present value; Integrated present value; Financial capital; Social capital; Natural capital (search for similar items in EconPapers)
JEL-codes: G31 G34 (search for similar items in EconPapers)
Date: 2021-04
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP16074 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:16074

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP16074

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().