Fall Distinguished Speaker Series Featuring Joel Stern
November 17, 2017
Joel Stern is the Chairman and CEO of Stern Value Management, he is a pioneer and leading advocate of the concept of managing for shareholder value. In addition, he has authored several books including The EVA Challenge and has published more than 150 articles and papers in financial economics.
A dynamic and entertaining speaker, Stern held the audience of 125 captive as he shared stories of the first Eva in his life (Eva Gabor, the “more beautiful and more talented older sister of Zsa Zsa, and not actually the inspiration for EVA”), his traumatic experience as a student braving “Intro to Accounting;” and what it was like pitching ideas to some of the world’s best-known CEOs, leaders of: Berkshire Hathaway, Coca-Cola, Whole Foods and the Godrej Group, to name a few.
Beginning with a reminder that there’s no free lunch in life, someone always has to pay, Stern outlined the early days of EVA.
Stern’s premise started with a new view of company valuation, he emphasized the error of not tracking training and developing human capital, research and development, and activities that build long-term brand value. Intangible items which are automatically written off in a balance sheet, yet inherently contribute to the success or failure of the company. Reinforcing this point with a quote from Peter Drucker, “Out of sight, out of mind. What gets measured gets managed,” Stern concluded that the true ROTC (rate of return of total capital) of a company could not be measured without inclusion of these assets.
Early on in his career, Stern was able to test his theory. He was introduced to Roberto Goizueta (then CEO of Coca-Cola), and through a broader discussion, explained his measurement tool. Stern made recommendations to take away unprofitable businesses, restructure their company to optimize economic value-adding practices, and reward employees based on their economic value additions to the company. Stern’s recommendations led to incredible success for Coca-Cola, including stock prices increasing six times under his direction.
Triumph bred more opportunity, and Goizueta introduced Stern to a whole new group of global business leaders. Stern Value Management quickly grew to the powerful and noteworthy global advisory firm it is today, introducing companies to the principles of Value-Based Management and applying them to operations, financial policy, strategy, and governance.
Stern currently teaches at eight graduate schools of business throughout the world including Columbia University, the University of Chicago, the University of Cape Town, Universidad Francisco Marroquín (UFM), and Singapore Management University. Maybe one day, we’ll see more of him here at Chapman University.
Until then, stay tuned for the next Distinguished Speaker Series event, coming in spring 2018.