New recommendations for better corporate portfolio management

Sep 25, 2008

Divesting the right businesses at the right time is critical to maximizing shareholder value. However, even the most sophisticated companies encounter substantial barriers to good corporate portfolio management.

In the "Corporate Portfolio Management Roundtable" that appears in the Spring 2008 issue of Morgan Stanley's Journal of Applied Corporate Finance, a distinguished group of professionals review the main hurdles facing better portfolio management and identify some innovative best practices.

It's difficult to create value in mergers, acquisitions and divestitures, and rigorous corporate portfolio management can help companies identify and preserve the good while ridding the bad. Public companies face barriers to exit, explaining why many firms seem slow to sell businesses that are reducing their value. There is a tendency of individual investors to wait too long to respond to changing market conditions.

Many boards and CEOs need to revamp organizational structure and compensation systems to ensure managers think more like investors, creating value via internal investment and M&A, as well as by pruning businesses that are worth more to different owners.

Among suggested best practices, Robert Pozen, Chairman of MFS Investment Management, proposes the establishment of an independent group within companies to function like a "SWAT Team" to support objective portfolio management. This SWAT team should consist of people who work in existing corporate units and do not have a vested interest in the status quo.

Additionally, companies can create an annual strategy offsite for the board to fully explore alternatives for driving shareholder value, including divestitures and capital structure changes. Also, information systems can be put in place that allow transparent analysis of each business unit's true economic returns and capital employed.

Source: Wiley

Explore further: Academic journals should adopt nonprofit publishing model, expert says

add to favorites email to friend print save as pdf

Related Stories

'Patent trolls' jeopardize innovation, study finds

Sep 23, 2014

(Phys.org) —New research co-authored by a Naveen Jindal School of Management accounting professor suggests that companies that don't manufacture goods or products but sue companies that do threaten innovation and economic ...

China's Alibaba sets new path with US IPO

Sep 14, 2014

With a possible record-breaking stock offering, Chinese online giant Alibaba is set to boost its role as a global company with a massive expansion potential.

Samsung looks on as profits migrate to online ecosystems

Jul 09, 2014

There used to be a time when the launch of a Galaxy handset, a Macbook, or a fancy game console could set investor hearts on fire and firms on a path to untold riches. These days, new devices no longer have ...

Solar project to bring energy to three D.C. institutions

Jun 24, 2014

The George Washington University (GW), American University (AU) and the George Washington University Hospital (GWUH) announced Tuesday that they will create a renewable energy project that brings solar power from North Carolina ...

Recommended for you

Research band at Karolinska tuck Dylan gems into papers

16 hours ago

(Phys.org) —A 17-year old bet among scientists at the Karolinska Institute has been a wager that whoever wrote the most articles with Dylan quotes before they retired would get a free lunch. Results included ...

A simulation game to help people prep for court

Sep 25, 2014

Preparing for court and appearing before a judge can be a daunting experience, particularly for people who are representing themselves because they can't afford a lawyer or simply don't know all the ropes ...

When finding 'nothing' means something

Sep 25, 2014

Scientists usually communicate their latest findings by publishing results as scientific papers in journals that are almost always accessible online (albeit often at a price), ensuring fast sharing of latest ...

User comments : 0