Harvard Business Review just released its
annual ranking of the world's best-performing CEOs on Monday, and this year's
winner is a leader in health care who remains laser-focused on
diabetes treatments, doesn't fly in private jets, and will be relatively
unknown to many readers in the United States.
Lars
Sørenson, the CEO of Denmark-based Novo Nordisk, sits atop this year's list of
chief executives due to his company's high ranking for both
its financial metrics and its performance on environmental, social and
governance issues.
The
magazine, which writes that
the "ranking of CEOs is meant to be a measure of enduring
success," notes that Sørenson leads the pack partly due to his nearly
exclusive focus on diabetes treatment, which has boosted sales and stock
returns as demand for insulin products has unfortunately grown. Yet in
addition, "his standing also reflects Novo Nordisk’s deep engagement
with social and environmental issues, which now factor in to our calculations,"
the publication writes.
That's
a big change HBR made in its methodology this year. In the past, HBR had only examined financial metrics of the S&P
Global 1200 companies—such as the country-adjusted total shareholder
return, industry-adjusted total shareholder return, and the change in market
capitalization during the current CEO's tenure.
But
this year, noting that
past rankings "failed to account for the many aspects of leadership that
go beyond mere market performance," the publication added a measurement of
the company's environmental, social and governance (ESG) performance, which was
calculated by the investment research firm Sustainalytics. Each CEO's
financial metrics are weighted at 80 percent and ESG ranking is weighted
at 20 percent to come up with the final list. The list also now includes
CEOs whose tenures started before 1995.
As
a result, this year's ranking differs sharply from years past. For
one, the top performers are more global, perhaps a sign that many U.S.
companies aren't performing as strongly as their peers on social and
environmental issues. Only three chief executives of US-based companies made
the top 10—John Chambers, who retired as Cisco's CEO earlier this year, Seagate
Technology's Stephen Luczo, and Biogen's George Scangos. The others at the top
of the list comprise six CEOs of European companies and one
Japanese CEO (Canon's Fujio Mitarai).
Last year, seven of
the top 10—and all of the top five—led US-based companies. Last year's No. 1,
for example, was Amazon CEO Jeff Bezos (who also owns the Washington Post). He
fell to No. 87 in this year's ranking due to the company's relatively
lower score on the ESG metrics.
One
thing that remained the same between both years: Just two women made the
top 100. They are Debra Cafaro, CEO of real estate investment trustVentas, and Carol
Meyrowitz, CEO of discount retailer TJX Companies.
In
an interview with
HBR, Sørenson, who earns less than many of the CEOs on this year's list
and doesn't use private jets ("that would send a signal to my
subordinates that my time is more valuable than theirs," he said) talked
about the company's "triple bottom line" philosophy. The company is
part-owned by a Danish foundation, he said, which "obliges us to maximize
the value of the company for the long term," adding that corporate
social responsibility also helps save money.
"If we keep polluting,
stricter regulations will be imposed, and energy consumption will become more
costly," Sørenson told the publication. "The same thing applies on
the social side. If we don’t treat employees well, if we
don’t behave as good corporate citizens in our local communities, and if we
don’t provide inexpensive products for poorer countries, governments will
impose regulations on us that will end up being very costly."
-The Washington Post
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