Episodit
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Fortuna’s Greg Milano talks capital and resource allocation best practices and highlights pitfalls, such as overinvesting in underperforming businesses and relying on misleading metrics. An objective, value-oriented approach is an underappreciated source of competitive advantage for corporate teams—and a proven driver of sustained returns for shareholders.
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Bennett Stewart, the “father of EVA” was co-founder of Stern Stewart and a leader in the shareholder value movement. He explains how EVA revolutionized performance measurement corporate governance and empowered better value management. He discusses the measure’s application in major companies like Coca-Cola and General Motors and how it helped them drive a focus on true value creation.
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Donald Chew, author and editor-in-chief of the Journal of Applied Corporate Finance, discusses the life and legacy of the late Professor Michael Jensen, a pioneering figure in financial economics. We explore Jensen's work on agency costs, corporate governance, and executive compensation, as well as his later focus on corporate culture. The conversation highlights Jensen's profound impact on how US corporations and capitalism create value today.
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Steve O’Byrne is among the most knowledgeable experts on executive pay practices, hands down. He shares his insights on the evolution of performance measurement and executive pay, from the fixed profit-sharing models of the 1920s to today’s market-based compensation packages. We explore the use of option grants, EVA, private-equity models, and even Steve’s most recent innovation, Employee Value Added. Steve is president of Shareholder Value Advisors with over 30 years’ consulting experience in compensation, performance measurement, and valuation.
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Our discussion with Dr. Anastassia Lauterbach explores the transformative power of AI, discussing its potential across industries, the impact of the European AI Act on innovation, and its implications for corporate executives and boards. She said, “Around 2012-2013, digital assets made up about 12-14% of the valuation of large businesses. After COVID, that number jumped to 90%... What does it mean for the competitiveness of your company?” For those interested in creating more value at their companies, Dr. Lauterbach is someone to listen to.
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Value management means applying objective valuation principles to strategy, resource allocation, and performance measurement processes to deliver sustained returns for shareholders and other stakeholders. In this episode, Fortuna Advisors' CEO Greg Milano discusses the very innovative approach Fortuna Advisors takes to value-based management, focusing on the key tenets of creating an “ownership culture” within companies.
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Dr. Mark Frigo, professor and founding director of the Center for Strategy Execution and Valuation at DePaul University, discusses the importance of long-term value creation and the application of strategic life-cycle analysis, which characterizes businesses into one of four categories: high innovation, competitive fade, mature and failing. He highlights his collaboration with CFOs and executive teams to integrate strategy with performance measures, ensuring sustainable value creation. Dr. Frigo also covers brand valuation, the challenges of aligning finance and marketing, and the need for strategic leadership at the CFO level.
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Kimberly Casiano, board member of Ford Motor Company, Mutual of America Financial Group, and the Federal Home Loan Bank of Atlanta, shares her story, from her early life in the South Bronx to becoming the first Latina on a top-five Fortune 100 board. Kimberly emphasizes the value of continuous learning, the power of honesty, the importance of nurturing genuine relationships, and the distinction between resume virtues and eulogy virtues.
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Ramesh Karnani explains the importance of approaching strategy from a shareholder value perspective and considers some of the problems that can result when strategy is not supported by insightful financial analysis. He also explains how return on investment derives from a combination of industry economics and competitive position. Ramesh’s insights draw from his decades of experience helping build the strategy consulting firm Marakon, as the leader of a strategic finance group in Credit Suisse’s investment banking unit, and as a Managing Director and Partner at the Boston Consulting Group. -
World-renowned Professor Anup Srivastava discusses the challenges of valuing, investing in, and developing intangible assets in today's corporate world. From the valuation of tech giants like Google and Facebook to the critical need for updated accounting frameworks, Professor Srivastava explains how “soft assets” like knowledge, algorithms, technology, and brand equity influence strategy, drive financial performance, and require rethinking traditional corporate governance practices.
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Fortuna Advisors CEO Greg Milano discusses flaws in corporate incentive plans that encourage bad behaviors, from financial manipulation to more subtle agency costs that impact companies’ long-term performance. As the late Michael Jensen said, “It's not how much you pay that matters. It's how you pay." The conversation hones in on the use of Relative Total Shareholder Return (TSR), a measure whose volatility leads to poor linkage to actual performance and undermines executives’ confidence in their long-term incentive plans (LTIPs). Want more insights from Executive Rewards experts at WorldatWork’s Total Rewards conferences? Purchase the Total Rewards’24 On-Demand Highlights package available through Sept 30, 2024 here, or lock-in your savings today and register to join WorldatWork in Orlando for Total Rewards ’25!
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Sean Pelkey, CFO of CSX Corporation, discusses the railroad company’s stunning transformation in the face of stark headwinds and a devastating loss of business as the coal industry collapsed in the early 2010s. Starting in 2017, CSX effectively tripled its share price over five years. Now, the company is shifting from efficiency to a profitable growth mindset. In Q1 2024, their share price hit an all-time high, reflecting this strategy's early success. Behind this cultural shift towards growth was a renewed focus on differentiated service offerings and a shared goal of value creation. Sean and Greg’s discussion highlights leading through change, balancing competing metrics, and strategic capital allocation, while showcasing how determined leadership can thrive, even in tough circumstances.
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Jeff Greene explains why capital allocation is so important, what companies typically do wrong, and his view on the main tenets of good capital allocation. As Jeff says, “Clearly, allocating capital is one of the CEO’s and CFO's most important jobs,” and, “Very few companies do all aspects of capital allocation well.” Jeff joined Fortuna in 2020, after 26 years as a partner in the Strategy & Transactions practice at EY (Ernst & Young), and he also spent eight years at investment bank Houlihan Lokey.
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Steve Chopp, currently CFO and EVP of Strategy for Lief Labs, describes his experiences implementing value-based management at smaller private companies. These companies tend to be less complex and the implementation process can be easier and faster, but it is still change management so there needs to be communication, training, etc., to help people see what is changing, how it affects them, and what they need to do differently. And since smaller companies tend to have tighter budgets for such things, they need to be resourceful, using, for example, train-the-trainer approaches.
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Ryan Barker explains how critical brand love is in driving total shareholder return. He is the CEO and founder of BERA Brand Management and has been revolutionizing the measurement of true brand differentiation using predictive AI technology. He talks about the shortcomings of media mix models, the use of brand metrics as an executive KPI, and the ways in which companies can improve how they manage by using brand love to develop plans, allocate resources, and drive more short- and long-term profitable growth. Our host, Greg Milano, also describes Fortuna Advisors' research showing how BERA brand metrics relate well to valuation multiples.
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With Anna Catalano’s extensive experience as a board director across many industries and as a former executive in energy, she shares insights that are useful to anyone in a business leadership role. Her thoughts on how companies can avoid being disrupted, and the board’s important role in this, are very helpful. She also covers risk management, innovation, and career advice for women, and throughout, she fills the discussion with well thought out advice to all.
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Scott Morrison recently stepped down from being CFO of Ball Corporation, the longest running user of EVA, which is economic value added. Over his tenure, Ball has delivered about eight times the total shareholder return of the market, a very impressive result. Scott explains how EVA has helped management and employees deliver such outstanding results, with commentary on planning, capital allocation, investment decisions and corporate culture.
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Pamela Savino, CEO and founder of Live Authentically, says “There's nothing more magnetic than a leader who's in touch with who they truly are,” but she concedes that, “inauthentic behaviors are pretty prevalent, mainly because our society isn't set up to promote authenticity.” She blends her corporate experience with the concept of authenticity and shows executives how they can attract more in all areas of life and business. Organizations who invest in authentic leadership will create more value.
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Gary Bischoping, a partner at private equity firm Hellman & Friedman and former CFO of Finastra and Varian Medical Systems, explains how “operationalizing value creation” can be a “superpower.” Indeed, at Varian, Gary championed a focus on explicit value management, both at corporate and in operations, that redirected their capital allocation priorities, reignited profitable growth, and dramatically increased the share price. Gary refers to himself as a “corporate finance junky,” and he explains the “art” of strategic finance in terms of alignment, rhythm, and truth.
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Investing in small and mid-cap public companies can be tricky, but Glenn Welling, founder and chief investment officer of Engaged Capital, has made a name for himself in the industry. About being an activist, he said, “When we arrive, nobody ever wants us there… [but] once we’ve been there for 90 days, nobody wants us to leave.”. With a background in investment banking and strategy consulting, Glenn brings valuable skills to each company he invests in. Glenn shared what Engaged Capital looks for when identifying companies to invest in and what companies can do to keep activists away. He also shared some of the more interesting situations his firm has faced, including an investment where the board included a priest and a nun as directors.
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