Corporate Portfolio Management Roundtable

The dean of a top ten business school, the chair of a large investment management firm, two corporate M&A leaders, a CFO, a leading M&A investment banker, and a corporate finance advisor discuss the following questions: What are today's best practices in corporate portfolio management? What roles should be played by boards, senior managers, and business unit leaders? What are the typical barriers to successful implementation and how can they be overcome? Should portfolio management be linked to financial policies such as decisions on capital structure, dividends, and share repurchase? How should all of the above be disclosed to the investor community? After acknowledging the considerable challenges to optimal portfolio management in public companies, the panelists offer suggestions that include: Companies should establish an independent group that functions like a "SWAT team" to support portfolio management. Such groups would be given access to (or produce themselves) business-unit level data on economic returns and capital employed, and develop an "outside-in" view of each business's standalone valuation. Boards should consider using their annual strategy "off-sites" to explore all possible alternatives for driving share-holder value, including organic growth, divestitures and acquisitions, as well as changes in dividends, share repurchases, and capital structure. Performance measurement and compensation frameworks need to be revamped to encourage line managers to think more like investors, not only seeking value-creating growth but also making divestitures at the right time. CEOs and CFOs should take the lead in developing a shared value creation model that clearly articulates how capital will be allocated.