Equity Value Enhancement

Chapter 4Risk in the Eye of the Beholder

Owners who want to increase the value of their businesses must think specifically about what they're doing to make that happen—rather than having an attitude of how profit can be paid in compensation and salary. Remember the point of Paul Thiel. The company's board and corner office has a fiduciary duty to maximize shareholder value.

This requires long-term thinking and a strategy to support value growth versus more instant gratification. This is in large part why executives are often provided stock options in lieu of higher salaries. For private companies not wishing to give up equity and/or control, they can offer phantom stock or nonvoting stock to key staff.

In order to instill the strategic framework that flows to every employee and externally from the company, businesses must cultivate extraordinary cultures. Such cultures embrace innovation and being dynamic. This is because the market is not static, so serving it can't be, either.

It's all about optics. One of the greatest challenges regarding risk is that different constituencies (owners, advisors, family, staff, shareholders, board members, clients, and vendors) are often focused on different risks. Each has a specific, sometimes narrow, perspective on risk. In this chapter we look at how various disciplines render opinions about risk and opportunity through their own lenses. These optics are primarily associated with mid-market companies, which the Wall Street Journal ...