With the focus on short-term corporate thinking under fire, a new ranking of the world’s best-performing CEOs by professors at INSEAD overturns a number of common assumptions about what constitutes effective long-term leadership. While many chief executives are highly respected and admired, it points to an interesting question – does the business community place a higher emphasis on reputation over performance?
To address this question, INSEAD professors Morten Hansen, Herminia Ibarra and Urs Peyer created a benchmark to measure how CEOs have built value over the long-term. The new global study ranks CEO performance at the world’s largest public companies over their entire time in office.
“The real test of a CEO’s leadership should be how the company performs over his or her tenure,” said Morten Hansen, Professor of Entrepreneurship and Management at INSEAD. “As the current economic crisis has taught us, it’s no longer enough to look at short-term gains in regards to executive performance. It is essential to examine the bigger picture.”
The authors compiled a list of nearly 2,000 CEOs worldwide to measure performance based on hard metrics — shareholder returns (country and industry adjusted TSR) and changes in market value. The overall list ranked 200 CEOs from 48 nationalities and 33 countries. A number of high profile “celebrity CEOs” did not make the list, whilst a surprising number of relatively unknown and unsung CEOs did.
Top of the list is Apple CEO Steve Jobs. Four UK CEOs feature in the top 20 – Gareth Davis, Imperial Tobacco Group (13th); Bart Becht, Reckitt Benckiser Group (16th); Sir Terry Leahy, Tesco (18th); and Graham Mackay, SABMiller (20th).
The study shows that insiders, CEOs who have risen through the ranks, tend to perform better than outsiders who are recruited. On average, insiders ranked 57 places higher than outsiders. All four Brits in the top 20 are insiders.
These leaders delivered spectacular results. On average, the top 50 performing CEOs delivered a total shareholder return of 997 per cent, with the top-spot CEO delivering a total 3,226 per cent return (30 per cent annually).
The results of the study have important implications for how shareholders assess CEO performance, CEO pay and succession planning, say INSEAD. Professor Herminia Ibarra at INSEAD, said: “This ranking reveals a number of successful ‘quiet CEOs’, which makes a persuasive argument for re-evaluating CEO success and gaining a better understanding of the qualities that truly define a global business leader.”
For the full list of top 200 performing CEOs in the world, visit INSEAD Knowledge at http://knowledge.insead.edu/top-ceos.cfm
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One thing it doesn't appear to do is to take into account the overall performance of a particular sector.
Lets say you have three companies in a sector, and whilst two have done very badly, making big losses, the third has broken even. Looked at in isolation this appears a modest performance but in the circumstances it is good leadership.