The HBR List of Best Performing CEOs

The knock on the most business leaders is that they don’t take the long view–that they’re fixated on achieving short-term goals to life their pay. So which global CEOs actually delivered solid results over the long run? Our 2014 list of top performers provides an objective answer.

The Best-Performing CEOs in the World

By Adi Ignatius

Leaders for the Long Term

sw_news_listing_03A few years ago I sat down with Starbucks founder Howard Schultz in his Seattle office to discuss the challenges of being a CEO. At one stage I asked whether he felt there was a disconnect between the person he would like to be the persona he needs to project while running a public company.

Serving as a CEO, he said, “has been difficult–and lonely.” Yet he’d found that it was indeed possible to be values-driven while also winning Wall Street’s respect. “But the only ingredient that works in this environment is performance–so we have to perform.”

Schultz has delivered on both fronts. He has become increasingly progressive, speaking out on topics ranging from presidential politics to gay marriage. And though that might make some shareholders cringe (and others applaud), he has resoundingly–and consistently–come through for investors. As a result, Schultz has earned a spot (#54) on our list of the 100 best-performing CEOs in the world. It’s a varied ranking, whose honorees represent 22 nationalities and countless personal values and styles. Another Seattle-based CEO, Amazon founder Jeff Bezos, comes out as #1.

How do you measure a CEO’s worth? We decided to approach the task scientifically, basing the ranking on hard data, not on reputation or anecdote. Specifically, we looked at the increase in total shareholder return and market capitalization (see “How We Calculated the Rankings”). We also focused on long-term–or at least longish-term–results. Our rankings consider the performance of active CEOs over their entire stints, and we’ve included only those who have been in their jobs for at least two years. (The median term for all CEOs we studied in seven years.)

The top CEOs have undeniably been effective. The top 50, on average, have delivered total shareholder returns of 1,350% (adjusted for exchange-rate movements) during their time on the job. That translates into an annual return of 26.2%. Adjusting for industry effects, average total shareholder returns for the top 50 are 1,161%, and for country effects, 1,087%.

We acknowledge, of course, that being a good CEO is about far more than just investment performance. Leading a company and creating value depend on many skills that hard to measure–strategic vision, authenticity, long-term planning. And investors certainly aren’t the only stakeholders that need tending to; the best-run companies connect effectively with customers, employees, and the communities where they operate.

Be we want this ranking to be as objective as possible, so we’ve put a premium on what we can measure precisely. Someday, we hope that there will be equally concrete ways to account for “intangibles”–environmental impact, employee satisfaction, customer engagement–so that we can confidently add that data to the formula. Until then we can only supplement this list with parallel data that tries to track some of these “softer” attributes.

Along those lines, we asked the Reputation Institute, a reputation management consultancy, to rank our top 100 CEOs in terms of these other skills–work environment, citizenship, governance, leadership, and so on. The results suggest, I’m afraid, that doing well doesn’t correlate much at this stage with doing good. That said, a few superstars scored high across the board, including Bezos, who despite Amazon’s well-publicized entanglements with publishers and authors, was #1 on the Reputation Institute list. (Schultz finished in the middle of the pack.)

What else do we know about the CEOs on this list? Most are men–only two women, Debra Cafaro of Ventas and Carol Meyrowitz of TIX, made the top 100–and the median age is 59. (This is similar to what we see in the entire group studied, in which 3% of CEOs were female and the median age was 58.) Thirteen CEOs are of nationalities that differ from their companies’. (Though it’s still not a global market for CEOs, that figure is more than double what it was in the 2013 version of this ranking.) And while the top 100 have each experienced their own unique journeys to success, there do seem to be two preferred pathways. Over a quarter of the CEOs have MBAs, and nearly as many had studied engineering.

We also looked at CEO pay, to see how that related to performance. To do so, we worked with Equilar, a company that collects information on compensation, to tally the most recent pay packages for the top 100. These elite CEOs are very well paid, as are most CEOs. But on average the executives on our list receive more of every form of compensation than their peers do.

Disney’s Bob Iger, #60 on our list, is the highest paid among our 100, with a total package of $34.3 million. That doesn’t make him the world’s best-paid CEO. In fact, according to Equilar, 13 CEOs earned more, led by Charif Souki of U.S. gas developer Cheniere Energy, whose 2013 compensation totaled $141.9 million.

So what’s the ultimate takeaway from this ranking? In many ways, Bezos’s place atop the list says it all. Here’s a CEO who has frequently underperformed in the short term while continuing to make big bets on the future. Amazon often reports quarterly losses, even as sales continue to rise. And though the company is subject, like many firms, to dramatic share-price swings, Amazon and Bezos have a long-term track record of delivering shareholder value that is second to none.

How We Calculated the Rankings

To create the list of the best-performing CEOs in the world, HBR began with the companies that, at the end of 2013, were in the S&P Global 1200, an index covering 70% of the world’s stock market capitalization and comprising firms in North America, Europe, Asia, Latin America, and Australia. We identified each company’s current CEO. To make sure that we had reliable data and focused on long-term performance, we excluded CEOs who had assumed their role before 1995 or after April 30, 2012. We also excluded any executive who had been convicted or arrested. All told, we ended up with 832 current CEOs from 827 companies. (Several companies had co-CEOs.) Those executives represented 43 nationalities and ran enterprises based on 30 countries.

Our research team, headed by Nana von Bernuth and assisted by statistician Hyunwoo Park and coders Peggy Lam, Michelle Kossack, and Phachareeya Ratchada, pulled financial data from DataStream and Worldscope and calculated daily company returns (including reinvested dividends) for each CEO from the first day that he or she took office until April 30, 2014. From this data we calculated three sets of numbers: country-adjusted returns (which exclude any increases in returns that are attributable merely to an improvement in the local stock market), industry-adjusted returns (which exclude increases that result from rising fortunes for the overall industry), and change in market capitalization (measured in inflation-adjusted U.S. dollars, using 2012 exchange rates).

We then ranked all CEOs for each metric–from 1 (best) to 832 (worst)–and calculated the average of the three rankings for every CEO to create the final overall ranking. Using three metrics is a balanced and robust approach: While the first two risk being skewed toward smaller companies (it’s easier to get large returns if you start from a small base), the third is skewed toward larger companies.

We also collected biographical data on each CEO and performed regression analysis on the data set. This allowed us to “control” for some factors and isolate the effect that one factor (such as having an MBA or an engineering degree, or being a company founder) had on CEO’s standing in the ranking.

HBR’s list of the world’s best-performing CEOs was conceived by Morten T. Hansen, Herminia Ibarra, and Urs Peyer. Previous rankings were published in HBR’s January–February 2010 and January–February 2013 issues, but the methodology has been updated for the 2014 list.

#17 Stephen Wynn

Company: Wynn Resorts, United States

Start Year: 2002 | Founder | Insider

Industry: Consumer Services

MBA Engineering Degree

Total Shareholder Return:

Country Adjusted 2,164%    Industry Adjusted 1,944%

Market Capitalization Change: +$22B