The Quest for Value: A Guide for Senior Managers [Hardcover]

G. Bennett Stewart (Author)

Book Description

Publication Date: February 12, 1991

In this bestselling classic of financial management, G. Bennett Stewart, III, raises and answers these provocative questions:

• Do dividends matter?
• Are earnings per share really accurate measures of corporate performance?
• What is the engine that really drives share prices?

More than that, Stewart lays the foundation for EVA^r, the financial management and incentive system now in place at nearly 300 companies around the world, and which is rapidly becoming the global standard for corporate governance.

Managers, confused about what investors really want, often find it difficult to reach informed decisions regarding business strategy, acquisitions and divestitures, financial structure, dividend policy, and executive compensation. But now an EVA^r -based revolution is providing a practical framework that managers can use to build a premium-valued company. At the forefront of this revolution is the consulting firm of Stern Stewart & Co., of which G. Bennett Stewart, III, author of The Quest for Value, is senior partner and cofounder.

The Quest for Value is written for senior management, key operating people, and planning and financial staff. This bible of financial management will assist managers in goal setting, resource allocation, strategy development, valuation of acquisitions, financial policy setting, incentive compensation planning, and building shareholder value.

The Quest for Value cuts sharply through the myths that to this day misinform corporate strategists in their pursuit of shareholder value. Laying waste to inaccurate yet widely used methods of performance, Stewart demonstrates how the Stern Stewart EVA^r approach not only creates greater shareholder value but also provides a powerful framework for the broadest range of corporate decision making.

Editorial Reviews

Review

"The Quest for Value is a stimulating and insightful presentation of financial issues facing every CEO in the 1990s." -- -- J. Ira Harris, general partner, Lazard Frères & Co.

"The Quest for Value is a superb reference for students and researchers in finance, operating managers, corporate planners, consultants, and deal doers. It is so chock-full of practical advice that each chapter is virtually a book unto itself. The anecdotal style is as entertaining as it is informative." -- Mark C. Ubelhart, practice leader, corporate finance/compensation,Hewitt Associates

"The Quest for Value is an excellent work for the corporate strategist. It presents new, leading-edge planning paradigms in a practical, user-friendly way. Stewart's plan to restructure from within is of utmost importance to top management. It is my belief that companies may well come to be structured in the manner he prescribes, by necessity if not by choice." -- George J. Kirk, director, corporate strategy, corporate development, Westinghouse Electric Corporation

"The Quest for Value is the definitive handbook on how to enhance shareholder value. It provides senior managers with practical goals and guidelines to create value for their shareholders and for themselves." -- James J. Schiro, vice chairman, Price Waterhouse

"After more than forty experiences over ten years, we firmly believe that corporations that are owned by their management and their board and are prudently leveraged will produce superior investment returns. In this excellent work, Bennett Stewart skillfully explains why." -- Carl Ferenbach, general partner, Berkshire Partners

"Bennett Stewart challenges corporate management to focus on its principal mission of increasing shareholder wealth and shows how to do it. We are in the process of implementing a number of his recommendations for executive incentives." -- William W. McCarten, senior vice president, finance, corporate controller, Marriott Corporation

"Bennett Stewart's book is a notable example of what we at Chicago have always believed: Nothing is more practical than good theory. His neatly chosen, real-world illustrations bring the basic concepts of finance vividly to life. The book can be read with profit (and enjoyment) by anyone with an interest in corporate finance, from beginning student to senior executive." -- Merton H. Miller, Robert R. McCormick Distinguished Service Professor, Graduate School of Business, The University of Chicago, 1990 Nobel Prize winner

About the Author

G. Bennett Stewart, III, is a senior partner of Stern Stewart & Co. Before co-founding Stern Stewart in 1982 with Joel Stern, he was a vice president of the financial advisory arm of the Chase Manhattan Bank. The EVA® management framework was developed by Mr. Stewart and his colleagues based on years of experience advising corporate clients on valuations, restructurings/recapitalizations, acquisitions and divestitures, and management incentive compensation plans. He is a principal speaker at Stern Stewart's EVA® seminars, and also serves as an executive editor of the firm's quarterly publication, The Journal of Applied Corporate Finance. Mr. Stewart has a M.B.A. from the University of Chicago Graduate School of Business and a B.S. in Electrical Engineering from Princeton University.

Product Details

• Hardcover: 800 pages
• Publisher: HarperCollins Publishers; 27th edition (February 12, 1991)
• Language: English
• ISBN-10: 0887304184
• ISBN-13: 978-0887304187
• Product Dimensions: 9.2 x 6.5 x 2.2 inches
• Shipping Weight: 2.8 pounds (View shipping rates and policies)
• Average Customer Review: 4.3 out of 5 stars  See all reviews (19 customer reviews)
• Amazon Best Sellers Rank: #141,450 in Books (See Top 100 in Books)
  • #51 in Books > Business & Investing > Management & Leadership > Strategy & Competition

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Customer Reviews

Most Helpful Customer Reviews

33 of 34 people found the following review helpful:

5.0 out of 5 stars Outstanding work on Corporate Finance, June 24, 1999

By A Customer

This review is from: The Quest for Value: A Guide for Senior Managers (Hardcover)

I was introduced to The Quest for Value during my MBA program. The material covered in the book was the basis for my Finance course, and I purchased the book to examine the source material. Finance is a branch of Economics, not Accounting, and many of the assertions made by Stewart reflect that fact. Familiarity with the basics of Microeconomics will greatly facilitate an understanding of the concepts described in the book. The fact that Stewart's work builds on sound economic concepts should be considered a strength, and not a weakness. The fact that other investment valuation tools do not conform to standard economic theory (Asset-Based, Excess Earnings, etc.) is the primary weakness of those theories. Investors are generally concerned only with prospective cash flows and the risks associated with those cash flows. The EVA Model captures the essential factors determining return and risk, removing Accounting distortions, and allows managers, owners, and other stakeholders to make informed decisions. Portions of the EVA Model have been integrated into other valuation tools, but usually in a piecemeal fashion. The genius of the EVA Model is the consolidation of many useful theories into a single model. A word of caution. If you are planning to use the EVA Model to "beat the market", please read the book. Stewart, Merton Miller, Damodaran and others are strong believers in the efficient-market theory, which essentially refutes the notion that tools like the EVA Model can be used for such purposes. As far as the general acceptance of Stewart's theories, it has been my experience that most corporate Finance departments are run by Tax Accountants with a limited/non-existent knowledge of the economic principles espoused by Stewart. They remain (much like my Investment Management Professor [1998], who had little knowledge of Stewart) enamored of EPS and ROE, long after numerous studies have indicated a loose correlation between EPS/ROE and stock value. While the book won't help you "beat the market", it is an outstanding tool for performing valuations on Closely Held Companies. The Quest for Value, in combination with the works of Damodaran (Investment) and Shannon Pratt (The Valuation of Closely Held Companies, The Valuation of Small Businesses and Professional Practices), will greatly assist any efforts in the valuation of such businesses.

37 of 39 people found the following review helpful:

3.0 out of 5 stars A Holy-Priced Book, Though Not Valuation's Holy Grail, November 28, 1999

By 

S. Schneider (USA) - See all my reviews
(REAL NAME)   

This review is from: The Quest for Value: A Guide for Senior Managers (Hardcover)

This book brings emphasis to the importance of Return on Invested Capital as a valuation metric in security analysis, although the author purports to substantially refine and expand on your prosaic understanding of this concept. It is an ambitious work that has a couple of inexplicable shortcomings, given its length, price, and its author's flair for pointing out the flaws in other valuation methods. The author makes no effort to apply his valuation methods to financial service companies (EVA is applicable to these kinds of companies, but you have to attend an EVA seminar to learn how to do that). There is no index! And there is little empirical data by researchers --outside the cult of EVA, at least-- to support some of Stewart's rather bold claims about this being a better metric for predicting stock price advancements than earnings, free cash flow, return on equity, etc.

And then there is the matter of EVA (tm) itself. Given the scarcity of objective data to support EVA as THE metric which best calibrates and predicts advancing/declining security market valuations, who really needs to embrace a somewhat complicated proprietary formula and worry about trademark infringement? For decades, Warren Buffett got by with crude, freebie valuation concepts such as return on equity, return on assets, the non-trademarked version of return on invested capital, and free cash flow. These ratios are as wonderfully easy to calculate in aggregate as EVA is hard to calculate, and the EVA enthusiast's faith that the latter proprietary concept is somehow better than the former freebie ones seems silly --although it does make for a lot of extra work (securing the future for the trademark owners, who have made a lucrative career of this stuff).

15 of 16 people found the following review helpful:

4.0 out of 5 stars Interesting, well-written and useful but................., May 11, 1999

By A Customer

This review is from: The Quest for Value: A Guide for Senior Managers (Hardcover)

Stewart has crafted an engaging treatment of Economic Value Added (EVA) which is accessible to both financial professionals and "lay-investors" alike. The material is highly readable and the case examples serve well to illustrate important concepts. However, one caveat to all of those "fools" who think they have found the holy grail to selecting winning stocks: EVA has been around for a long time (the theoretical work precedes THE QUEST FOR VALUE by decades) and is well-integrated into investment management methodologies. There have been several studies which demonstrate that selecting stocks based on EVA or even changes in EVA will not produce excessive returns for investors (See Damodaran). Thus, the real "value" of THE QUEST FOR VALUE for private investors is to highlight the limitations of accounting measures of valuation.