The Harvard Business Review recently published its annual list of top 100 CEOs of 2016. Started as a practice in 2010, HBR annually rates CEOs performance globally on various metrics which range from financial to ESG (environment, social, governance). Having assessed almost 1,200 large companies this time round, they use a measure of financial performance developed by a team of Harvard academics for 80% of their score. The remaining 20% came from averaging two overall measures of corporate sustainability performance, including CSRHub.
Sharing its rigorous methodology, HBR added that they began the compilation of the initial list of Top CEOs by looking at the companies that at the end of 2015 that were in the S&P Global 1200; an index that comprises 70% of the world’s stock market capitalization and includes firms 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 or arrested. We ended up with 895 CEOs from 886 companies. (Several companies had co-CEOs.) Those executives ran enterprises based in 32 countries.”
To arrive at the final 100 top names in the global business world, HBR decided to also include performance on nonfinancial aspects. To do so, HBR consulted with Sustainalytics, a provider of environmental, social, and governance research and with CSRHub which collects, and analyzes ESG (environment, social, governance) data. To calculate the final ranking, HBR provided adequate weights to the different points of assessment. They combined the overall financial ranking (weighted at 80%) and the two ESG rankings (weighted at 10% each), post which the list with the final 100 was created.
Lars Rebien Sørensen CEO of Novo Norsdisk a Denmark based healthcare company featured at the top of the list followed closely by Martin Stuart Sorrell the CEO of WPP plc. These CEOs were ranked highest in a cumulative score including both financial and nonfinancial matters.
One important fact the report noticed was the challenging time that the CEOs faced today. Companies are today growing and operating in a very volatile and a ‘slow growing’ economy. This volatility brings with itself a lot of uncertainty in the form of regional, political, demographical uncertainty which in turn creates a larger incentive for companies to look at the short-term goals rather than to develop long-term plans. This finally translates into CEOs focusing on the short term.
Against this backdrop, the report added, “it’s heartening to see a group of business leaders compiling track records that allow them to stick around and implement long-term strategies. On average, the world’s 100 best CEOs have been on the job for 17 years—and have generated a 2,091% overall return on their stock (adjusted for exchange-rate effects), or a 20.2% annual return.”
You can know more about the rankings here.