'I Saw Stern Stewart's EVA~® Work At Eli Lilly. At Guidant, I See EVA Working Wonders.'

摘要

"In the Fall of 1993, the Eli Lilly boaixi of directors invited Stern Stewart Managing Partner Joel Stern to educate us in the use of Economic Value Added (EVA~®) both as a measurement tool and a bonus incentive system. We later decided to launch EVA at Lilly, and as CFO, I presided over its implementation. I saw EVA work at Eli Lilly. At Guidant, I see it working wonders. "EVA, put simply, is net operating profit after taxes minus a charge for the cost of the capital necessary to generate that profit. EVA tells you whether you are beating your cost of capital and, if you are not, it forces you to rethink your business strategy. In 1994, Lilly tied annual cash bonuses of our senior managers to EVA profit improvement. From 1995 to 1997, Lilly stock increased 324% while the S&P 500 increased 111% and a peer group of 11 other pharmaceutical companies increased about 200%. So, when we launched Guidant Corp., we brought EVA with us.