Abstract
the use of EP can also enlarge the role of finance by transforming corporate strategies into operating metrics useful for guiding and motivating managers and other employees. However, despite the importance of these measures in reducing intrafirm agency costs, this issue has received little attention. What are the issues associated with the use of EP-type measures and their role in helping optimize the architecture of decision rights in a firm? What are their advantages and disadvantages? And how effective are they as internal performance metrics? For example, although they can be useful in reducing intrafirm and managerial agency costs, what about the need to ensure a focus on longterm value creation? Indeed, it is clear that the use of EP-type measures is not a substitute for continuing attention to the fundamental drivers of long-term value in a business. So how should a firm use EP and other such measures? And how should investors evaluate these efforts?
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