Despite significant portfolio restructuring and repeated
cost-reduction initiatives, MeadWestvaco (MWV) was still delivering
below-average shareholder returns.
Chairman and CEO John Luke decided to adopt a more
disciplined approach to managing shareholder value.
Our Relationship and Approach
> In 2008, we worked with line management of each business to conduct a company-wide assessment of where and why economic profits were being created and consumed across the corporation and the markets they served
> Everywhere and always value is highly concentrated, and helping management understand where and why value is concentrated, helps to unlock the latent value improvement potential in the portfolio; at MWV, only 50% of revenues and 40% of employed capital created > 100% of the company’s shareholder value and MWV only created shareholder value when it participated in economically profitable markets
Granular Understanding of Sources and Drivers of Value
> We worked with the leadership team to ensure all opportunities had an “apples-to-apples” comparison of the sources and drivers of economic profits, and risk-adjusted valuation of each opportunity
> Galt provided coaching and support to help line management develop detailed implementation plans for each opportunity
> Armed with this financial and strategic assessment, the MWV leadership team was able to define and quantify a clear and concise corporate value-improvement agenda
> Over the next 18 months, management implemented a number of portfolio and business model changes while also
institutionalizing a number of management disciplines to better align incentives and decisions with shareholder interests – e.g., shifting investment to economically profitable businesses and business segments (like Brazil packaging), restructuring the production footprint of the company, focusing on profitable, multi-product customer relationships
> Between 2008 and 2010, MWV delivered significant improvements in overall economic profit growth above what was conservatively forecast to occur
> While the competition delivered a 31 percent return to shareholders over that time period, MWV delivered a 60 percent increase in shareholder value, double that of its peers