Due to the COVID 19 pandemic many companies have faced and still face countless challenges. Strategies must be adjusted, and costs must be reduced due to the lack of sales to avoid possible company crises. But how rigorous should profit-oriented management be when the world has been caught off guard by an unprecedented pandemic? Is it possible to combine considerate and entrepreneurial action and how can the interests of all concerned be reconciled?
This paper aims to answer and guide these questions. The course of the crisis, the economic consequences and the political measures taken in Germany are discussed. The methodology makes use of current sources and evaluations and sheds light on the shareholder value approach from a historical perspective. It critically examines the application of the concept to the extent of the Corona crisis.
Some 23.53 million people were confirmed as infected and about 810,00 deaths were reported worldwide. The COVID 19 pandemic is changing life as known until the start of 2020 at a drastic pace. The course and the effects herald the economic crisis in 2020.
On Wall Street, the biggest slump in stock prices since 1987 was reported. Other indices around the world also lost heavily because economic life in many countries had largely come to a stand-still. For 2020, the Federal Government expects the gross domestic product to decline by 6.3 per cent. The reasons for this are well known. The drastic restrictions make it impossible to continue to operate as usual. This means that there will not be a full recovery in 2021 either.
Table of Contents
1 Introduction
2 Definition of terms
2.1 Cashflow
2.2 Profitability
2.2.1 Return on total capital
2.2.2 Profitability on turnover
2.2.3 Return on equity
2.2.4 Leverage effect
3 The Corona Crisis
3.1 Causes
3.2 Economic consequences
4 The shareholder value approach
4.1 Explanation and classification
4.2 Shareholder value as a key figure
4.3 Shareholder value as a concept
5 Consequences of the corona crisis and links to shareholder value
5.1 Measures by the Federal Government
5.2 Links to shareholder value
6 Conclusion
Objectives and Core Topics
This paper explores the impact of the COVID-19 pandemic on the economy and critically examines the relevance and implementation of the shareholder value approach during such an unprecedented global crisis.
- Analysis of the economic consequences of the COVID-19 pandemic.
- Examination of the shareholder value concept as a management strategy.
- Evaluation of the relationship between profit-oriented management and crisis resilience.
- Investigation of political measures taken by the Federal Government in Germany.
- Critical discussion of corporate ethics in the context of value-based management.
Excerpt from the Book
4.1 Explanation and classification
Shareholder value is the value available to the shareholders of a company. It is also known as the market value of equity. More generally, this can be referred to as enterprise value. It should be noted that this ratio is not only applicable to listed companies but is practicable regardless of the legal form and type of shareholders. Only the main interested parties are subsequently different. It is an indicator of business management that deals with the value of a company. The basis for its calculation is cash flow. In a broader sense the shareholder value approach is also a form of strategic management and can be subsumed under the generic term value-based management. The basic orientation of this concept is the concentration of corporate activities on increasing the value of the company.
The principle of the shareholder value approach has its origins in the USA. In 1986 Alfred Rappaport published his book "Creating Shareholder Value" there. His basic statement was based on the indicator of shareholder value and showed the inadequacy of purely accounting values. On this basis, Rappaport drafted a guide to corporate management which aims to maximise this value.
In principle, it became necessary to address this idea because many listed companies feared a takeover. Specialists in this field roughly determined the value of a company or parts of it and compared it with the stock market value. If the difference was positive, the company in question was a potential takeover candidate that could be sold at a profit.
To protect the companies from takeovers, it was considered advisable to concentrate the company's activities on increasing its value.
Summary of Chapters
1 Introduction: Provides an overview of the pandemic's global scale and its economic impact, setting the stage for the critical analysis of management strategies.
2 Definition of terms: Explains foundational business concepts such as cash flow and profitability ratios to establish a common understanding for the subsequent analysis.
3 The Corona Crisis: Details the origin of the pandemic and its severe economic fallout, including stock market crashes and the decline of global economic output.
4 The shareholder value approach: Defines the shareholder value concept, its historical background, and its role as a strategic management tool for corporate value maximization.
5 Consequences of the corona crisis and links to shareholder value: Discusses government intervention in Germany and critically evaluates how the shareholder value focus affects corporate decision-making during the crisis.
6 Conclusion: Summarizes the findings, noting that while the shareholder value concept is valid, its implementation requires moral responsibility and a long-term perspective.
Keywords
Shareholder Value, Corona Crisis, Economic Impact, Profitability, Cash Flow, Strategic Management, Corporate Ethics, COVID-19, Value-based Management, Germany, Government Measures, Sustainability, Short-time Work, Financial Performance, Crisis Management.
Frequently Asked Questions
What is the core subject of this paper?
The paper examines the criticism of the shareholder value approach specifically in the context of the economic challenges brought about by the Corona crisis.
What are the central thematic fields covered?
Key topics include the definition of financial indicators (cash flow/profitability), the mechanics of the shareholder value approach, and the economic impacts of the COVID-19 pandemic on German enterprises.
What is the primary research goal?
The goal is to determine if the shareholder value approach remains a viable management concept during a crisis and how it reconciles with the responsibilities companies have toward stakeholders.
Which scientific methods are employed?
The author uses a literature-based methodology, relying on current sources, economic evaluations, and a historical perspective on management theories.
What is discussed in the main part of the assignment?
The main part covers the theoretical framework of shareholder value, the specific economic consequences of the Corona crisis, and the government support measures implemented in Germany.
Which keywords characterize this work?
The work is characterized by terms such as shareholder value, COVID-19, economic crisis, corporate ethics, and financial management.
How does the author view the Tönnies Holding case?
The Tönnies case serves as an example of problematic, overly profit-oriented behavior where corporate goals were prioritized over public safety and pandemic control measures.
Is the shareholder value approach fundamentally flawed according to the author?
No, the author concludes that the concept itself is not flawed, but rather that its implementation often lacks the necessary long-term perspective and moral considerations during times of crisis.
- Quote paper
- Felix-Sebastian Ament (Author), 2020, The Shareholder Value Approach. Criticism using the Example of the Corona Crisis, Munich, GRIN Verlag, https://www.grin.com/document/943426
