In turbulent times, steadiness and stability can be significant virtues.
These qualities are evident in the 100 men and women who’ve achieved a spot in HBR’s 2018 ranking of the world’s top-performing CEOs.
They face an array of outside forces—savvy competitors, demanding customers, profit-hungry investors, political and economic headwinds.
Nonetheless, their companies have shown a remarkable ability to sustain momentum: Seventy of the 100 leaders in last year’s ranking performed well enough to achieve the distinction again this year—including Pablo Isla, of the Spanish fast-retailing giant Inditex, who repeats as the number-one-ranked executive.
In turbulent times, steadiness and stability can be significant virtues. These qualities are evident in the 100 men and women who’ve achieved a spot in HBR’s 2018 ranking of the world’s top-performing CEOs. They face an array of outside forces—savvy competitors, demanding customers, profit-hungry investors, political and economic headwinds. Nonetheless, their companies have shown a remarkable ability to sustain momentum: Seventy of the 100 leaders in last year’s ranking performed well enough to achieve the distinction again this year—including Pablo Isla, of the Spanish fast-retailing giant Inditex, who repeats as the number-one-ranked executive.
This consistency is the result not just of an unwavering leadership style but of the way HBR measures performance. In a business world that often seems obsessed with today’s stock price and this quarter’s numbers, our ranking takes the long view: It’s based primarily on financial returns over each CEO’s entire tenure—and because these CEOs have been successful, many have enjoyed a long run in the job. (CEOs on the list have been in the position for an average of 16 years, versus an average in 2017 of 7.2 years for S&P 500 CEOs.) To calculate the final rankings, we also factor in each company’s rating on environmental, social, and governance (ESG) issues.
This focus on career numbers results in a ranking with limited annual churn. Seven of this year’s top 10, and 18 of the top 25, were ranked at those levels last year. In a typical year, from one-quarter to one-third of CEOs in the prior year’s ranking fall off owing to retirement, resignation, death, or poor financial performance. Among the notable names on the 2017 list who failed to repeat are Martin Sorrell, of WPP (who resigned amid allegations of misconduct); John Mackey, of Whole Foods (whose company was acquired by Amazon); and Leslie Wexner, of L Brands (its stock tanked this year).
Other trends remain more or less consistent. In the good news–bad news department, female representation among the 100 CEOs is up 50% from last year—but that’s because this year’s ranking includes three women, compared with just two during prior years. (Here we offer what has become a familiar explanation: The paucity of women in the ranking says nothing about men’s performance as CEOs versus that of women; rather, it’s the result of very low female representation among the CEOs of global S&P 1200 companies, the universe from which our ranking is drawn.)
Although year-to-year shifts in our rankings aren’t dramatic, examining the rankings over longer stretches illustrates the challenge of sustaining world-beating performance. Since 2013 only six CEOs have appeared every year: Jeffrey Bezos, of Amazon; Pablo Isla, of Inditex; Blake Nordstrom, of Nordstrom; Paolo Rocca, of Tenaris; James Taiclet Jr., of American Tower; and Renato Alves Vale, of CCR. Even among this select group, Bezos stands tall: On the basis of financial performance alone (that is, disregarding the ESG component of our rankings), Amazon’s founder has been the top-performing leader each year we’ve compiled the ranking since we began using our current methodology, in 2014. And since Bezos first topped the list, in November of that year, the company’s stock price has grown more than six fold.
One of the tests of any leader is how he or she adapts to a shifting environment. Among the biggest shifts companies face right now is in the global political environment. The rise of populism as a potent force is most apparent in the election of Donald Trump and Great Britain’s departure from the European Union, but it’s evident in many other regions, too. For business leaders, especially in manufacturing, this has brought the threat (and sometimes the reality) of tariffs and trade wars, along with industry-specific opportunities and challenges.
Amid such uncertainty, how actively should corporate leaders speak out on political issues—and on which ones? Two U.S. CEOs on this year’s list illustrate differing views.
Satya Nadella succeeded Steve Ballmer as CEO of Microsoft in 2014; that company’s turnaround, led by the growing strength of its cloud-computing business (which Nadella headed before becoming CEO), helped put him at #46 on the 2018 list. Nadella believes in taking a stand on issues that are directly relevant to Microsoft’s business, such as immigration reform, but he draws the line at voicing his personal political beliefs. “No one elected me,” he told HBR editor in chief Adi Ignatius in a 2017 interview. “When we talk about taking a political stance, that’s not…what our employees expect of me.”
Other leaders view this piece of the CEO role more expansively. Among them is JPMorgan Chase CEO Jamie Dimon, who is #22 this year, owing to a sharp run-up in the bank’s stock since 2016. “If you want the right public policy, you have to be an advocate,” Dimon told Ignatius in a 2018 interview. “And you can’t be parochial. You can’t talk only about that one little regulation that’s going to help your company. You need to talk about tax policy, trade, immigration, technology.”
Whether and when CEOs speak out doesn’t factor directly into our rankings—but such activism may be captured indirectly in ESG scores, according to the experts at CSRHub and Sustainalytics, the firms that help us crunch the data. For instance, ESG ratings do account for company lobbying expenditures, the degree of disclosure on issues such as carbon use, and the presence of a sustainability officer at the company’s top level, among other measures. A CEO’s political statements (or lack thereof) may also show up in data gleaned from employee review sites such as Glassdoor. The phrase “CEO activism” connotes proactive behaviour by leaders—but more and more often, dealing with political realities is just another facet of a multifaceted job.
METHODOLOGY & DATA
To compile our list of the world’s best-performing CEOs, we began with the companies that at the end of 2017 were in the S&P Global 1200, an index that comprises 70% of the world’s stock market capitalization and includes companies in North America, Europe, Asia, Latin America, and Australia. We identified each company’s CEO but, to ensure that we had a sufficient track record to evaluate, excluded people who had been in the job for less than two years. We also excluded executives who had been convicted of a crime or arrested. All told, we ended up with 881 CEOs from 870 companies. (Several companies had co-CEOs.) Those executives ran enterprises based in 29 countries.
Our research team, headed by Nana von Bernuth and assisted by the coders Onorina Buneanu and Clara Frank and the data programmers Morand Studer and Daniel Bernardes from Eleven Strategy Consultants, gathered daily financial data for each company from Datastream and Worldscope, starting with the CEO’s first day on the job and ending April 30, 2018. (For CEOs who took office before 1995, we calculated returns using a start date of January 1, 1995, because industry-adjusted returns prior to then were unavailable.)
We then calculated three metrics for each CEO’s tenure: the country-adjusted total shareholder return (including dividends reinvested), which offsets any increase in return that’s attributable merely to an improvement in the local stock market; the industry-adjusted TSR (including dividends reinvested), which offsets any increase that results from rising fortunes in the overall industry; and change in market capitalization (adjusted for dividends, share issues, and share repurchases), measured in inflation-adjusted U.S. dollars.
We then ranked each CEO—from 1 (best) to 881 (worst)—for each financial metric and averaged the three rankings to obtain an overall financial rank. Incorporating three metrics is a balanced and robust approach: While country-adjusted and industry-adjusted returns risk being skewed toward smaller companies (it’s easier to get large returns if you start from a small base), the change in market capitalization is skewed toward larger companies.
To measure performance on nonfinancial issues, HBR consulted with Sustainalytics, a leading provider of environmental, social, and governance (ESG) research and analytics that works primarily with financial institutions and asset managers, and with CSRHub, which collects, aggregates, and normalizes ESG data from nine research firms and works mainly with companies that want to improve their ESG performance. We computed one ESG rank using Sustainalytics ratings and one using CSRHub ratings for every company in our data set. To calculate the final ranking, we combined the overall financial ranking (weighted at 80%) and the two ESG rankings (weighted at 10% each), omitting CEOs who left office before June 30, 2018.
HBR’s list of best-performing CEOs was conceived by Morten T. Hansen, Herminia Ibarra, and Urs Peyer. Previous rankings have been published in HBR in 2010 and annually since 2013; the rankings prior to 2014 utilized different methodologies.
THE CEOS
23 of the CEOs on this year’s list have appeared 3 times in the past 5 years; 17 have appeared 4 times; and 6 have appeared on all 5 of those lists: Jeffrey Bezos, of Amazon; Pablo Isla, of Inditex; Blake Nordstrom, of Nordstrom; Paolo Rocca, of Tenaris; James Taiclet Jr., of American Tower; and Renato Alves Vale, of CCR.
1. PABLO ISLA, INDITEX
Country: SPAIN Start Year: 2005 Industry: RETAIL Insider: No MBA: No Financial Ranking: 29 Sustainalytics Ranking: 60 CSRHUB Ranking: 128
2. JENSEN HUANG, NVIDIA
Country: UNITED STATES Start Year: 1993 Industry: INFORMATION TECHNOLOGY Insider: Yes MBA: No Financial Ranking: 4 Sustainalytics Ranking: 125 CSRHUB Ranking: 304
3. BERNARD ARNAULT, LVMH
Country: FRANCE Start Year: 1989 Industry: CONSUMER GOODS Insider: No MBA: No Financial Ranking: 7 Sustainalytics Ranking: 226 CSRHUB Ranking: 186
Country: JAPAN Start Year: 1996 Industry: HEALTH CARE Insider: Yes MBA: No Financial Ranking: 46 Sustainalytics Ranking: 202 CSRHUB Ranking: 206
10. MARTIN BOUYGUES, BOUYGUES
Country: FRANCE Start Year: 1989 Industry: INDUSTRIALS Insider: Yes MBA: No Financial Ranking: 54 Sustainalytics Ranking: 259 CSRHUB Ranking: 140
11. WES BUSH, NORTHROP GRUMMAN
Country: UNITED STATES Start Year: 2010 Industry: INDUSTRIALS Insider: Yes MBA: No Financial Ranking: 41 Sustainalytics Ranking: 353 CSRHUB Ranking: 153 NOTE: Will step down January 1, 2019
12. SHANTANU NARAYEN, ADOBE SYSTEMS
Country: UNITED STATES Start Year: 2007 Industry: INFORMATION TECHNOLOGY Insider: Yes MBA: Yes Financial Ranking: 56 Sustainalytics Ranking: 257 CSRHUB Ranking: 192
13. BERNARD CHARLÈS, DASSAULT SYSTÈMES
Country: FRANCE Start Year: 1995 Industry: INFORMATION TECHNOLOGY Insider: Yes MBAL No Financial Ranking: 37 Sustainalytics Ranking: 479 CSRHUB Ranking: 141
14. MARK PARKER, NIKE
Country: UNITED STATES Start Year: 2006 Industry: CONSUMER GOODS Insider: Yes MBA: No Financial Ranking: 32 Sustainalytics Ranking: 405 CSRHUB Ranking: 258
15. MICHAEL MUSSALLEM, EDWARDS LIFESCIENCES
Country: UNITED STATES Start Year: 2000 Industry: HEALTH CARE Insider: Yes MBA: No Financial Ranking: 27 Sustainalytics Ranking: 355 CSRHUB Ranking: 359
16. BRAD SMITH, INTUIT
Country: UNITED STATES Start Year: 2008 Industry: INFORMATION TECHNOLOGY Insider: Yes MBA: Yes Financial Ranking: 52 Sustainalytics Ranking: 333 CSRHUB Ranking: 184 NOTE: Will step down December 2018
17. HAMID MOGHADAM, PROLOGIS
Country: UNITED STATES Start Year: 1997 Industry: REAL ESTATE Insider: Yes MBA: Yes Financial Ranking: 80 Sustainalytics Ranking: 57 CSRHUB Ranking: 244
18. TAI-MING “TERRY” GOU, HON HAI PRECISION INDUSTRY
Country: UNITED STATES Start Year: 2004 Industry: MATERIALS Insider: Yes MBA: No Financial Ranking: 107 Sustainalytics Ranking: 450 CSRHUB Ranking: 173
53. LEONARD SCHLEIFER, REGENERON PHARMACEUTICALS
Country: UNITED STATES Start Year: 1988 Industry: HEALTH CARE Insider: Yes MBA: No Financial Ranking: 23 Sustainalytics Ranking: 539 CSRHUB Ranking: 760
53. RICHARD GONZALEZ, ABBVIE
Country: UNITED STATES Start Year: 2013 Industry: HEALTH CARE Insider: Yes MBA: No Financial Ranking: 117 Sustainalytics Ranking: 328 CSRHUB Ranking: 219
55. MASAYOSHI SON, SOFTBANK
Country: JAPAN Start Year: 1981 Industry: TELECOMMUNICATION Insider: Yes MBA: No Financial Ranking: 17 Sustainalytics Ranking: 674 CSRHUB Ranking: 676
56. DEBRA CAFARO, VENTAS
Country: UNITED STATES Start Year: 1999 Industry: REAL ESTATE Insider: No MBA: No Financial Ranking: 43 Sustainalytics Ranking: 626 CSRHUB Ranking: 518
Country: UNITED STATES Start Year: 2013 Industry: HEALTH CARE Insider: Yes MBA: Yes Financial Ranking: 102 Sustainalytics Ranking: 571 CSRHUB Ranking: 180
62. BLAKE NORDSTROM, NORDSTROM
Country: UNITED STATES Start Year: 2000 Industry: RETAIL Insider: Yes MBA: No Financial Ranking: 93 Sustainalytics Ranking: 437 CSRHUB Ranking: 392
63. LARRY YOUNG, DR PEPPER SNAPPLE
Country: UNITED STATES Start Year: 2007 Industry: CONSUMER GOODS Insider: Yes MBA: No Financial Ranking: 114 Sustainalytics Ranking: 330 CSRHUB Ranking: 335 NOTE: Retired July 9, 2018, the day on which Dr Pepper Snapple completed its merger with Keurig
64. STEVE SANGHI, MICROCHIP TECHNOLOGY
Country: UNITED STATES Start Year: 1991 Industry: INFORMATION TECHNOLOGY Insider: Yes MBA: No Financial Ranking: 59 Sustainalytics Ranking: 539 CSRHUB Ranking: 569
65. TOSHIKI KAWAI, TOKYO ELECTRON
Country: JAPAN Start Year: 2016 Industry: INFORMATION TECHNOLOGY Insider: Yes MBA: No Financial Ranking: 163 Sustainalytics Ranking: 56 CSRHUB Ranking: 226
Country: HONG KONG Start Year: 1991 Industry: CONSUMER SERVICES Insider: Yes MBA: No Financial Ranking: 14 Sustainalytics Ranking: 822 CSRHUB Ranking: 765
75. BRIAN JELLISON, ROPER TECHNOLOGIES
Country: UNITED STATES Start Year: 2001 Industry: INDUSTRIALS Insider: No MBA: No Financial Ranking: 40 Sustainalytics Ranking: 597 CSRHUB Ranking: 795 NOTE: Stepped down September 1, 2018
Country: UNITED STATES Start Year: 1998 Industry: RETAIL Insider: Yes MBA: NO Financial Ranking: 3 Sustainalytics Ranking: 873 CSRHUB Ranking: 863
84. TIMOTHY RING, C. R. BARD
Country: UNITED STATES Start Year: 2003 Industry: HEALTH CARE Insider: Yes MBA: NO Financial Ranking: 58 Sustainalytics Ranking: 585 CSRHUB Ranking: 717
85. MARC CASPER, THERMO FISHER SCIENTIFIC
Country: UNITED STATES Start Year: 2009 Industry: HEALTH CARE Insider: Yes MBA: Yes Financial Ranking: 98 Sustainalytics Ranking: 588 CSRHUB Ranking: 395
86. GARY DICKERSON, APPLIED MATERIALS
Country: UNITED STATES Start Year: 2013 Industry: INFORMATION TECHNOLOGY Insider: Yes MBA: Yes Financial Ranking: 150 Sustainalytics Ranking: 339 CSRHUB Ranking: 236
87. ARNE SORENSON, MARRIOTT INTERNATIONAL
Country: UNITED STATES Start Year: 2012 Industry: CONSUMER SERVICES Insider: Yes MBA: No Financial Ranking: 105 Sustainalytics Ranking: 472 CSRHUB Ranking: 470
88. OLA ROLLÉN, HEXAGON
Country: SWEDEN Start Year: 2000 Industry: INFORMATION TECHNOLOGY Insider: No MBA: No Financial Ranking: 39 Sustainalytics Ranking: 769 CSRHUB Ranking: 704
89. THIERRY BRETON, ATOS
Country: FRANCE Start Year: 2008 Industry: INFORMATION TECHNOLOGY Insider: Yes MBA: No Financial Ranking: 206 Sustainalytics Ranking: 69 CSRHUB Ranking: 68
