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This book was originally published in German: Von Highflyern, Penalties und Bruchlandungen. Wie Sie Ihr Vermögen nicht in den Sand setzen. Versus Verlag, Zurich 2012, ISBN 978-3-03909-135-5
Bibliographic information published by the Deutsche Nationalbibliothek The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.dnb.de.
The work and all parts thereof are subject to copyright. All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without either the prior written permission of the publishers or a license permitting restricted copying. © 2013 Versus Verlag AG, Zurich More information on books published by Versus is at www.versus.ch. Cover and chapter illustrations: Thomas Woodtli · Witterswil Typesetting and production: Versus · Zurich Printing: Kösel · Krugzell, Germany Printed in Germany ISBN 978-3-03909-155-3
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Table of Contents Preface
7
Foreword
9
1
What Are We Talking About?
11
2
What Legal Form Fits Best?
13
3
Who Reaps the Value?
16
4
Life Insurers Acting Like Mutuals
19
5
Investment Banks Acting Like Partnerships
22
6
Steer Clear of Consulting Firms
26
7
Soccer Teams: For the Players—or the Fans?
27
8
Actors in the Limelight
31
9
Airlines: All for the Customers
33
10 Beware Outdated Profit Models
36
11 Genuine Stock Corporations in Action
39
12 Invest More Effectively
49
Summary
53
Methodology
54
Bibliography
57
Acknowledgments
61
The Author
63
Table of Contents
5
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Preface You’ve probably wondered at some point why, even without any indication of strategic or management errors, certain companies hardly ever manage to generate shareholder value over the years. Maybe you’ve put it down to market distortions resulting from government intervention. What you probably haven’t considered is the possibility that these companies have chosen the wrong legal form in the first place. So, what is the significance of a company’s legal form in terms of its chances of generating value? Adriano Lucatelli has investigated that question. The legal form of a business is indeed a very important or even a decisive factor: only when the value created really goes to the owners is long-term shareholder value actually possible. There is now empirical evidence to support that claim—in the form of a comprehensive new study, probably the first of its kind, that examines the US, UK, Euroland, Japanese, and Swiss stock markets to show which companies and industries have added sustained value for their shareholders over the past 10 years. What’s striking about the findings is that in all the major markets, irrespective of local idiosyncrasies, the “fake” stock corporations bring up the rear in terms of shareholder value. With those companies, the lion’s share of value created goes not to the owners but to the management or customers. The aim of this book is to give both business owners and investors new insights into how and where they can make meaningful and profitable use of their financial resources. I assure you that once you’ve read it, you’ll be following the development of the stock markets—and of your personal investments—in a very different light! Shaun O’Callaghan, Founder of Quartet Research Ltd and author of Turnaround Leadership
Preface
7
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Foreword The idea of looking into the questions about poorly chosen legal form and off-target corporate governance started to take firm shape around three years ago on a sunny day high above Lake Zurich as I expounded my views to Claude Baumann, founder of financial news portal finews.ch, over a platter of Swiss alpine delicacies. Claude listened patiently and encouraged me to write down my thoughts. I followed his advice, shortly afterward publishing a short article. The response, particularly from English-speaking readers, was so positive that I felt obliged to go into more depth. The result was a booklet in German published by Versus in Zurich in 2012, which was very well received. I decided to produce an English edition for the benefit of my friends in the United Kingdom, the United States, Africa, and Asia, adding more data and examples and updating the existing data. And the rest, as they say, is history. Adriano B. Lucatelli London, July 2013
Foreword
9