Value based management: the managerial approach that changes the organizations culture

This paper aims to show that a cultural change is underway in business-profit organizations that is leading management to develop a value-based management approach, giving priority to those managerial objectives that represent the production of shareholder value under conditions of sustainable growth that takes into account stakeholder constraints. Behind this rapid spread of the shareholder value theory, in particular in the U.S. and Britain, are concerns about defending against raiders, the entry of institutional investors in capital markets, the remuneration of management, and the crises in the pension systems. This new view of managerial aims in capitalist profit organizations has made value-based management a sophisticated managerial approach. Its objective is shareholder wealth maximization through the adoption of strategies aimed at finding the maximum Economic Value of Firms deriving from the maximum Economic Value Added. This is obtained by increasing internal productivity and strengthening the firm’s position in markets by means of policies involving quality and the strengthening of relations with the stakeholders. The inadequate preparation of managers, which is often linked to outright corruption, as illustrated by the numerous financial collapses in recent years in the United States (from Enron to Worldcom) as well as in Europe (Italy in particular), have increased suspicions that value-based management is inadequate in organizations that operate in an advanced capitalist environment. Despite these criticisms, the spread of value-based management continues, and many firms can attest to its success in terms of shareholder value. This paper intends to describe how to improve the implementation of value-based management by identifying its strong point in the spread of a culture based on value and on communication at all levels of the organization.