Harvard Business Review recently released its top-100 ranking of the world’s best-performing chief executives for 2017, with environmental, social and governance factors propelling this year’s number one leader to the top spot.
According to HBR, Isla came in at 18th when measured on financial returns alone, however, Inditex’s performance on environmental, social and governance factors, accounting for 20% of a leader’s score, was enough to see him take out top spot.
“Colleagues describe Isla’s management style as humble and at times almost shy,” HBR said.
“Although he spends much of his time travelling to visit stores, he rarely attends store openings, choosing to avoid the limelight.
“At headquarters he prefers management by walking around over holding formal meetings — part of his attempt to maintain an entrepreneurial, small-company culture, even as the firm has grown very large.”
Inditex stands out among fashion retailers due to its “success in helping consumers easily migrate between physical stores and online shopping, and its ‘proximity sourcing’ system, under which more than half of production takes place close to home”, according to HBR.
“The company encourages consumers to bring worn-out clothing to its stores for recycling (in Spain it runs an at-home-pick-up recycling program), and the Join Life brand of Zara, its largest chain, is produced using recycled fibres and with careful attention to the consumption of water and other resources.”
In second place on this year’s list is Martin Sorrell, chief executive of global advertising group WPP. He is followed by Jensen Huang from US tech firm Nvidia; Jacques Aschenbroich from French automotive supplier Valeo; and Bernard Arnault of luxury goods maker LVMH.
Based solely on financial performance, HBR said Amazon founder Jeff Bezos (ranked 71st) would have taken out top spot, however, this year 88% of global companies scored higher than Amazon on environmental, social and governance factors.
“But those ratings are improving,” HBR observed.
“The company’s massive Web Services division generates its own solar and wind energy. And in the past two years Amazon has hired several seasoned sustainability executives, creating optimism about changes likely to come.”
Netflix’s Reed Hastings was another chief executive who scored strongly in terms of financial ranking (fourth), but was ranked 89th overall, while Nordstrom’s Blake Nordstrom was another retail presence in the top 100, ranking 44th.
HBR said this year’s list, which “relies on objective performance measures over a chief executive’s entire tenure”, had remained “remarkably consistent with last year’s tally”.
Two of this year’s top three chief executives were also counted in the top three last year, while this year’s top includes 16 of the leaders who were ranked in last year’s top quartile. Of those who made the list in 2016, 72% have made an appearance again this year, while 23 of the chief executives on this year’s list have made the rankings for four years runnings.
According to HBR, the average adjusted return on stock generated by this year’s 100 is 2,507% over 17 years, at an average annual return rate of 21%.