In the November-December 2018 issue of the Harvard Business Review (HBR), released last week, the publication reveals the 2018 ranking of the world’s 100 top-performing CEOs. HBR measures performance based primarily on financial returns for the entire run of each CEO’s tenure, with HBR describing it as “… taking the long view,”. CEOs on the list have been in the position for an average of 16 years, vs the 2017 average of 7.2 years. To calculate the final rankings, HBR also factors in each company’s rating on environmental, social, and governance (ESG) issues.
In last year’s ranking, 70 of the 100 CEOs performed well enough to achieve the distinction once again this year including Pablo Isla, the Industria de Diseño Textil, S.A. (Inditex) CEO, who is again the number-one ranked CEO. Seven of this year’s top-10, and 18 of the top-25 CEOs, were ranked at the same levels last year. Usually, in a year, 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 did not show up again in 2018 are Martin Sorrell, of WPP (he resigned amid misconduct allegations); John Mackey, of Whole Foods (acquired by Amazon); and Leslie Wexner, of L Brands (its stock plummeted this year). Female representation among the top-100 CEOs rose by 50% YoY but is still low with HBR highlighting that the scarcity of women in the rankings “says nothing about men’s performance as CEOs vs that of women; rather, it’s the result of very low female representation among the CEOs of global S&P 1200 companies …”.
Since 2013 only 6 CEOs have appeared every year – Jeff Bezos (Amazon); Pablo Isla (Inditex); Blake Nordstrom (Nordstrom); Paolo Rocca (Tenaris); James Taiclet Jr. (American Tower); and Renato Alves Vale (CCR). Among them, Bezos stands out due to financial performance alone (i.e. disregarding the ESG component). Amazon’s founder and CEO has been the top-performing leader every year since HBR first compiled the ranking using its current methodology in 2014. Since Bezos first topped the list, in November 2014, Amazon’s share price has grown more than six-fold. Bezos ranks #68 on this year’s list. Based on financial performance alone (i.e. disregarding the ESG component of the rankings), Bezos has been the top-performing leader since 2014, when HBR originally began publishing the list in its current form.
Other interesting facts around the top CEOs in this survey are: 20 CEOs lead companies that are based outside their countries of birth; 32 have an MBA; 34 have an engineering degree and, on average, they became CEOs at age 44 and have been in office 16 years. Information technology (IT) is the most highly represented industry, with 22 IT executives on the HBR list. Marillyn Hewson of Lockheed Martin, Debra Cafaro of Ventas, and Nancy McKinstry of Wolters Kluwer are the only women on the list, reflecting the very low female representation among the CEOs of global S&P 1200 companies. France has a notably large presence in the ranking – nine out of the 100 executives lead French companies, with four making the top-10.
Below we highlight the top-10 CEOs identified by the HBR report (a full list can be found on https://hbr.org/2018/11/the-best-performing-ceos-in-the-world-2018).
10. Martin Bouygues, Bouygues. The French industrial group specialises in construction, real estate development, media and telecommunications. Bouygues has been CEO since 1989. The company’s share price is down c. 26% YTD.
9. Hisashi Ietsugu, Sysmex. Sysmex is a Japanese healthcare business and Ietsugu has been CEO since 1996. The share price is down c. 12% YTD.
8. Johan Thijs, KBC. KBC Group N.V. is a Belgian universal multi-channel bank-insurer, focusing on private clients and small and medium-sized enterprises in Belgium, Ireland and Central Europe. Thijs has been CEO since 2012. YTD, the share price is down c. 14%.
7. Jacques Aschenbroch, Valeo. Valeo is a French multinational automotive supplier providing a wide range of products to auto manufacturers and after-markets. Aschenbroch has been CEO since 2009. The share price is down 52% YTD.
6. Marc Benioff, Salesforce. Salesforce is a US cloud computing company and Benioff has been CEO since 2001. Salesforce’s share price is up c. 38% YTD.
5. Elmar Degenhart, Continental. Continental is a German automotive manufacturing company specialising in tyres, brake systems, interior electronics, automotive safety etc. Degenhart has been CEO since 2009. YTD, the Continental share price is down c. 38%.
4. Francois-Henri Pinault, Kering. Kering is a French luxury group which owns such luxury goods brands as Gucci, Yves Saint Laurent, Alexander McQueen, Bottega Veneta, etc. YTD, the counter is down 3%. Pinault has been CEO since 2005.
3. Bernard Arnault, Moët Hennessy Louis Vuitton SE (LVMH). LVMH is another French luxury consumer goods business. Arnault has been the CEO since 1989. The share price is up c. 6% YTD.
2. Jensen Huang, Nvidia. Nvidia is a US IT firm which designs graphics processing units for the gaming and professional markets, as well for the mobile computing and automotive markets. Huang has been its CEO since 1993. YTD, the share price is up c. 7%.
1. Pablo Isla, Inditex. Inditex is a Spanish multinational clothing company with brands that include Zara, Massimo Dutti, and Pull&Bear. Isla has been CEO since 2005. YTD, the share price is down14.5%. The publication highlights that measured on financial returns alone, Isla comes in at 29th spot in the ranking. However, Inditex’s strong ESG performance, which accounts for 20% of each CEO’s ranking, sees him leaping to the top spot.