Shareholder Value As a Measure of Value?

I asked someone the other day how they defined value as they described their efforts to add value in their business change efforts - The reply was quickly given "shareholder value".

I reflected on this over the last few days and thought actually this is pretty difficult at the moment and really doesn't help us in project land - why?

Well shareholder value is the combination of divided and gain on share price and really is a longer term goal through a complete economic cycle because it is dramatically affected by short term volatility of share price; particularly in recent times.

I mean when do you measure it? at balance sheet date each year? or is it over a full economic cycle? which would make it quite difficult to use to measure shorter term initiatives.

You could embark on a major piece of change to radically re design the business and in reality that may well have been highly successful but the market falls of 2008/09 would wipe any so called value off the face of the project making the initiative a complete failure if that what the programme uses as its measure?

Is shareholder value a useful measure for business change. Well perhaps not? Is it just too high level and abstract to be really practical; give me NPV any day.

Tom Graves, in a recent thread on a linkedin group robustly thinks that shareholder value is a massive distraction and other definitions of value are much more important, I have sympathy for his views.