It’s no accident that chief executives so often focus on short-term financial results at the expense of longer-term performance – they have every incentive to do so. Developing a simple yet rigorous way to gauge long-term performance is crucial; after all, in business, leaders default to managing what’s measured.
Five years ago, we launched a global project to implement a scorecard that would not only get people talking about long-term performance but also alter the way that boards, executives, consultants and management scholars thought about and assessed CEOs. We wanted this innovation to shine a spotlight on the CEOs worldwide who had created long-term value for their companies, and we wanted to give executives around the world critical benchmarks they could aim for.
Three years ago, in the January-February 2010 issue of HBR, we introduced such a scorecard. It evaluated chief executives on their entire tenure in office. We used it to rank the performance of nearly 2,000 CEOs. This month we are publishing a new version of that analysis. We have expanded it along two important new dimensions – making the group of CEOs we studied truly global, and examining which CEOs and companies were able to do well not only financially but also in terms of corporate social performance.
Who’s up, who’s down?
It comes as no surprise that the best-performing CEO over the past 17 years was Steve Jobs of Apple, who was No. 1 on our 2010 list as well. From 1997 to 2011, Apple’s market value increased by $359 billion, and its shareholder return experienced average compound annual growth of 35%. That remarkable accomplishment is likely to go unbeaten for a long time.
Jeff Bezos of Amazon.com has now climbed to the No. 2 spot, up from No. 7 in our 2010 list. Under his leadership, the company delivered industry-adjusted shareholder returns of 12,266% and saw its value increase by $111 billion. The highest-ranked woman on the list is Meg Whitman, currently the CEO of beleaguered HP, whose performance as the CEO of eBay from 1998 to 2008 earned her the No. 9 spot. Overall, only 1.9% of all the CEOs we studied were women.
One notable new name is Lars Sorensen, the CEO of Novo Nordisk, a company that made its name selling insulin for diabetics. He shot up from No. 233 in 2010 to No. 20 in our current ranking. After Sorensen took over the company, in 2000, he spent 10 years and $500 million expanding the sales force to make it truly global. When all his competitors were investing in diabetes pills, Sorensen shut down Novo’s pill research and instead focused the company on its core competency – insulin and other injected diabetes medications, notably prefilled insulin “pens” that eliminate the hassle of using a vial and syringe. His bet that sales would continue to grow in the wake of a worldwide diabetes epidemic has clearly paid off.
Even industries that have gone through tough times in recent years have seen some exceptional results. Airlines, for example, have not been doing well, but Air China, under the leadership of Li Jiaxiang (No. 17 on our list), bucked that trend. During his tenure, from 2004 to 2008, the company’s total shareholder return was 1,022 percentage points higher than the average for its industry peers, while its market capitalisation rose by $37 billion. With his guidance, Air China obtained a 50% share of the market in major Beijing airports and joined the largest airline alliance in the world.
The world of CEOS is not flat
With a truly global sample to study, we can do a better job of comparing countries and regions. This is a significant advancement; for decades, most analysis of CEO performance has been US-centric. Now we’re able to examine data country by country – and we find real differences when we do.
China has been the growth miracle of the past decade, so you might expect CEOs there to have done very well. We find that the opposite is true: Among the 3,143 CEOs we analysed, the average rank of Chinese executives was 176 places lower than the average rank of US executives. Only three Chinese companies’ CEOs made the top 100, though 17% of all the executives studied were from China. The Chinese leaders we asked about this discrepancy theorised that as the country’s companies become more innovation-focused, their performance will improve.