You are Jordi Pi-Vives Cassany, Director Financiero of Cartones Catalana Pi-Vives S.A., the mid-cap Catalan paper-and-board group your grandfather founded in 1956. Three plants — Igualada, Vilanova i la Geltrú, Reus — all report ROIs that any board would call healthy: 22%, 25%, 18%. The consejo familiar nevertheless looked at the five-year CAPEX line at the last meeting and noted, dryly, that the machines are getting old. None of the three plant managers brought a modernization project to the table this cycle. The number on every dashboard — ROI — is doing its job too well. You suspect it is starving the company.
The situation
A family-controlled paper-and-board mid-cap headquartered in Igualada (Barcelona province), founded in 1956 by Joan Pi-Vives i Camps around a single recycled-paper machine bought at auction from a failed Sabadell mill. Seventy years and three generations later: revenue 2025 of €185M, EBITDA €33M (18% margin), 640 employees, three operating plants in Catalonia, a customer book that runs from Carrefour and Mercadona private-label packaging through Bonpreu and Bon Àrea fresh-meat trays to specialty food-grade work for Nestlé España.
You are Jordi Pi-Vives Cassany, 49, ingeniero industrial UPC + Esade Executive MBA. Third generation. CFO since 2018. Your cousin Marc Pi-Vives Cassany, 51, is the CEO; he runs commercial and operations, you run finance, treasury and the consejo familiar's quarterly capital-allocation review. Between you the family controls 78% of the share register; the remaining 22% sits with three institutional minority holders who came in during the 2014 restructuring and read your audited accounts twice a year.
The three plants are run as independent profit centers. Igualada (110 employees, recycled liner and fluting paper, the historic mill) — revenue €60M, NOPAT €6.6M, capital invested €30M, ROI 22%. Vilanova i la Geltrú (180 employees, corrugated-board converter, the cash cow built in 1987) — revenue €75M, NOPAT €8.3M, capital invested €33M, ROI 25%. Reus (95 employees, BRCGS-certified food-grade specialties opened in 2009 for the Nestlé contract) — revenue €50M, NOPAT €5.9M, capital invested €33M, ROI 18%. Each plant manager's annual bonus is anchored to plant ROI versus a 15% threshold, then a sliding scale to 25%.
The mood at the last consejo, end-April: chair Doña Pilar Pi-Vives Codina (your aunt, your grandfather's daughter, 72) opened the meeting by saying that the company had invested €11M of CAPEX over the last five years against €175M of cumulative EBITDA — a re-investment rate of 6%, against an industry norm closer to 18%. Smurfit Kappa just commissioned a €120M box plant in Sant Boi; DS Smith is rumored to be eyeing a Tarragona acquisition. The three plant managers reported their ROIs at the same meeting with quiet satisfaction. Nobody volunteered a CAPEX proposal.
You went home that evening with the suspicion that has been growing in you for two cycles: the ROI metric is incentivising under-investment. Each plant manager, paid on ROI, has every reason to refuse a project whose return is below their plant's existing ROI — even if the project would clear the company's cost of capital with room to spare. The denominator effect kills the numerator's bonus. You want to take a different metric to the consejo: Economic Value Added (EVA) — NOPAT minus a capital charge at WACC — which rewards every project that earns above the cost of capital, regardless of what the plant's baseline ROI looks like. Three projects are sitting in the engineering team's drawer right now, one per plant, that the ROI metric will reject and the EVA metric will accept.