The director as investor

Published on November 28, 2019   16 min
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Hello. My name is Len Jones. I'm currently a finance director of a large motor dealership group in the West Midlands and North Wales of the UK. I'm a qualified chartered accountant, I'll have been a main board Pharma director for 25 years, and I'm here to talk to you about investment appraisal and the view of a director. As what this means, drawing on some theory and my experience of what investment appraisal is in the world of the practitioner. I experience interest in the behavioral side of business and decision-making.
Today, we will speak about principles rather than the detailed investment techniques. You can get these in any good book or lecture theater. The main issue here is what is shareholder value and benchmarking investments appraisal? It's more about how we decide what is driving a value and the quality of the information in which you have to make a decision. What is the definition of success?
The context for investments, the title is 'Whose strategy is it anyway?', because not only the sole domain of the company, this is more about what's happening in external environments, and this is about strategy and the alignments of investment appraisal. You can see references to the type of strategy, and essentially, it's about direction and response to the variables, parameters that drive the notion of return. The main point of this slide is to set out the fundamentals of what types of strategy there are and how they impact on choice of benchmark or investment variable, and the key issue of actually having an alignment of investment choices and communicating with the people who actually make things happen. You can see there are three types, market moving, responsive and, non-responsive. These are pulled from various sources, which you can see on the slide. The issue for me is that this is about choice and aligning investment appraisal with the design strategy. We will also explore in a bit more detail about the levers of control, which is mainly Simon's view on how benchmarking can effect the results. The issue for companies and directors is guessing the correct lever of control to ensure that the detailed operational plans align with the chosen strategy. If you read any modern textbook on investments appraisal, there will be a section devoted to benchmarks and performance measurements, which ultimately leads us to thinking about failed levels of pay and executive rewards. This in itself is a separate topic and touches on the notion of agency and stewardship theory. But really what I want to talk about is what directors are trying to achieve by investments.