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Although most board members don’t suffer much personally if sued, no one wants the kind of publicity HP’s board is experiencing related to its Autonomy purchase. But now taxpayers are on the hook to sort this all out.

Here’s my recent article on red flags at HP. It provides a short roadmap for boards and investors that don’t want to burn through cash. And provides the inside scoop, for those who don’t know it, into phraseology that means more than one might suspect.

http://management.fortune.cnn.com/2012/11/30/hp-meg-whitman-autonomy-2/

Clearly, long term holders would benefit from some transparency into the company’s process as part of signing off on deals.

In due diligence, smart boards don’t rely just on multiple auditors or investment bankers. They use internal resources or hire outside parties to look behind the numbers and determine what’s really going on.

One CFO who recently went through an acquisition expressed it as “connecting the numbers to the business,” explaining their use of outsiders to help them get an understanding of what was really happening with the numbers, in order to arrive at a fair valuation. In contrast, the investment banks they hired just took the numbers “as is”. As a result, their valuation analyses didn’t provide much value. (Not to mention the bias related to the lack of independence/inherent conflicts of interest.) And although they hired auditors as well, they only hired them to do what they do best. They did not use them to analyse what was going on behind the surface to arrive at a solid valuation.

Certainly outside reports from analysts, short sellers and the press — and information on the web should be de rigueur reading material for the board of any company seeking to acquire another firm.

The Value Alliance and Corporate Governance Alliance http://www.thevaluealliance.com/
Copyright 2012 The Value Alliance Company. All rights reserved.

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Is looking behind the numbers a lost art? M&A transactions might be more accretive if the reviews were more rigorous. So too, it’s easy to accept earnings as is when paying CEOs. But boards need to look beyond that. We need incentives that work to increase the size of the pie and make our country more prosperous.

Here’s an article on the fiscal cliff based on a recent Institute for Policy Studies report. Should CEOs be paid bonuses for changes in the tax code?

http://management.fortune.cnn.com/2012/11/26/fiscal-cliff-ceo-pay/

If you have comments on this blog post, please ignore the comments are closed notice below and just email me directly at ebloxham@thevaluealliance.com

The Value Alliance and Corporate Governance Alliance http://www.thevaluealliance.com/
Copyright 2012 The Value Alliance Company. All rights reserved.

(We now have a mechanism to provide you with email alerts of posts. To receive email notifications of posts, simply click here. http://www.thevaluealliance.com/bloxham_voice_email_alerts.htm)

Corporate Valuation is a topic of importance to not only shareholders but all stakeholders: managers, employees, creditors, communities, customers and suppliers, etc.

Jim McRitchie, publisher of corpgov.net, recently reviewed Alex Lajoux and Bob Monks’ new book on Corporate Valuation which should be in your library if valuation topics matter to you (and they should).

Please see Jim’s excellent post and review here: http://corpgov.net/?tag=valuation

The book Corporate Valuation provides a view on all the major methodologies of valuation. Here’s a link to Monks and Lajoux’s book if you don’t have it: http://www.amazon.com/Corporate-Valuation-Portfolio-Investment-Governance/dp/1576603172/ref=sr_1_1?ie=UTF8&s=books&qid=1304871947&sr=1-1

One of the surprises for Jim in the book was to find that I was credited with the development of one of the valuation methodologies featured in the book, a relatively new valuation methodology (which I wrote about and documented in the book Economic Value Management published in 2002 http://www.amazon.com/exec/obidos/ASIN/0471354260/thevalueallia-20).

In case you are also unfamiliar with my work in this area, the valuation methodology I developed  takes into account the two-way value exchanges between the corporation and all its stakeholders as well as the valuation of the separate entities themselves, something I describe as the three-way mirror.

My methodology can be used by anyone and all stakeholders because unlike other approaches, it is much more comprehenisive in its thinking – and provides a toolset for a variety of stakeholders to assess the corporation from their own and multiple perspectives.

The methodology and approach go into enough detail that it can be especially useful for managers who already are close to the issues but need a framework to ensure they aren’t ignoring very important, relevant factors in the valuation process.

Recently I wrote for the inaugural edition of the Journal of Sustainable Finance (a peer reviewed journal) showing how the valuaton approach I had developed early in the last decade was essential for approaching corporate sustainability in a comprehensive and holistic way.  http://www.ingentaconnect.com/content/earthscan/jsfi/2011/00000001/00000001/art00007;jsessionid=5d3nlijhk67dq.alice

Historically speaking, Alex Lajoux and Bob Monk’s reference to my work in their book on Corporate Valuation highlights the fact that my work pre-dates more recent shared value concepts and provides greater depth in laying out a specific valuation framework. Of course, I am very grateful  to Lajoux and Monks for recognizing my work in modeling the corporation and valuation in this way.

If you haven’t yet read it, I know the book Corporate Valuation http://www.amazon.com/Corporate-Valuation-Portfolio-Investment-Governance/dp/1576603172/ref=sr_1_1?ie=UTF8&s=books&qid=1304871947&sr=1-1 will surprise you as it did Jim in numerous ways – with information on valuation approaches, insights and methodologies with which you may not yet be familiar.

Certainly, it will get you to rethink what you may have thought you knew on this very important topic.

The Value Alliance and Corporate Governance Alliance www.thevaluealliance.com

Eleanor Bloxham www.eleanorbloxham.com

Copyright 2010 The Value Alliance Company. All rights reserved.