Quick: Guess one CEO of an American company that Harvard Business Review ranked in the top 10 of its list of the best-performing CEOs. Warren Buffett? Mark Zuckerberg? Disney’s Bob Iger? Bain & Co.’s Bob Bechek, who employees voted the best in another ranking?
You’d be wrong on all of them. On its 2016 list of the world’s best-performing chief executives, released this week, eight of the top ten are CEOs of European companies. One runs a Brazilian bank. And just one CEO of a U.S. company cracked the top 10: Jen-Hsun Huang, co-founder and CEO of Nvidia, a Santa Clara, California-based technology company known for its graphics processors in gaming units.
The top four CEOs all lead European firms: Lars Rebien Sørensen, CEO of Danish health care company Novo Nordisk (who was also No. 1 last year); Martin Sorrell, who leads British advertising giant WPP; Pablo Isla, head of Spanish retailer and Zara parent Inditex; and Herbert Hainer, CEO of Germany’s Adidas. Roberto Egydio Setubal, chief executive of Brazilian bank Itaú Unibanco, ranks fifth.
HBR’s list stands out in two ways: For one, it examines a CEO’s lifetime financial performance (or at least, back to 1995, if the CEO has a longer tenure) rather than annual performance. “Business leaders should be judged by the results they produce over their entire tenure,” editor Daniel McGinn wrote in the introduction. “That approach achieves a truer – and more dependable – picture of performance.” On average, the list’s 100 names had 17-year tenures.
In addition, it bases 20 percent of the score on environmental, social and governance (ESG) ratings to account for how a company performs on sustainability issues. This year, it split the ESG weighting using scores from two firms that examine how companies fare on those issues, Sustainalytics and CSRHub, in order to reduce subjectivity.
Notably, it’s that balance of sustainability measures with financial performance that explains why CEOs of U.S.-based companies are less represented at the top. To measure financial performance, HBR adjusted total shareholder return by country to account for any increases that just come from local stock market performance (it also looks at industry-adjusted returns and change in market capitalization). And in 2014, when it ranked CEOs purely on financial performance, seven of the top 10 CEOs ran U.S.-based firms, and only one European company cracked that short list. (The magazine notes that Amazon CEO Jeff Bezos, who also owns The Washington Post and who was ranked No. 1 in 2014, would have led the list for three years if financial performance was the only thing considered.)
Sustainalytics CEO Michael Jantzi said in an interview that including measures on environmental and social issues, as well as how companies are governed, tends to help European companies for two reasons: European shareholders tend to value those issues more, and regulatory environments in Europe, whether in public policy or in stock exchanges, mean more of those companies have had to make those issues a priority.
“The last figures I’ve seen, almost 60 percent of European invested assets integrate ESG into decision-making,” Jantzi says. He notes that “the link between sustainability and shareholder value has just been embraced longer” in Europe than in the U.S.
While just one CEO of a U.S. company cracked the top 10, 42 others made the top 100, including Nike CEO Mark Parker (No. 11), Starbucks CEO Howard Schultz (No. 14) and Salesforce.com CEO Marc Benioff (No. 16). Two women, Ventas CEO Debra Cafaro (No. 43) and Lockheed Martin CEO Marillyn Hewson (No. 51). Disney’s Iger showed up at No. 32; Buffett, Zuckerberg and Bechek did not make the list.