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Long-term creation of financial value SIG does not strive for short-term increases in corporate value, but for long-term growth. Value is generated when the return achieved is greater than the cost of capital employed. In conjunction with an external institute, SIG reviews the long-term average weighted cost of capital (WACC) within the scope of a periodic process. Cost of equity capital is calculated using the capital asset pricing model (CAPM). SIG applies objective benchmarks to establish the parameters. Value creation A primary objective of management is to create value for the owners. To achieve this goal, the NOPAT (net operating profit after taxes) generated over a given period must be higher than the capital employed on which interest has to be paid according to the WACC. NOPAT is calculated by adding the goodwill impairment to the operating profit (EBIT). This value is subsequently reduced to an after-tax basis by applying the average medium-term corporate tax rate (30%). Financial transparency Financial transparency throughout the group is essential if value creation is to be measured. Here, SIG is able to benefit from its efforts in the area of internal reporting and the acceleration of processes. The reporting and consolidation software, for example, is available to all specialists via the Internet. Performance-linked compensation of management The value-oriented management system is reflected in the performance-linked compensation of SIG executives. Splitting the bonus into meeting personal goals and achieving financial budget targets has proven to be a viable concept. The shareholding plan for management is long-term in nature and emphasizes our forward looking corporate policy. The number of assigned shares allotted depends on the performance of the SIG share compared to the SPI index over a period of three years. |
