“The knock on most business leaders is that they don’t take a long view – that they’re fixated on achieving short-term goals to lift their pay. So which global CEO’s actually delivered solid results over the long run? The 2013 version of the CEO scorecard provides an objective answer.”
Sounds promising, doesn’t it, this introduction. Certainly because it’s a Harvard Business Review Article on an Insead study. Both renowned management institutions recognize since the 2008 financial crisis the downside of a sole focus on short-term financial performance. They put since then sustainability at the heart of their management and leadership development. What do we learn from the article?
Well, it’s still all about the shareholder performance. The authors look solely at financial data. The ranking is based on the average of three different rankings: market capitalization change, country-adjusted & industry-adjusted company returns. The ranking is sophisticated because it takes the full tenure of the CEO’s into account with a minimum of 2 years. It’s also global because it includes CEO’s from BRIC companies. But it’s still a very individual perspective and it only looks at profit and neglects the other two P’s of sustainability: what about planet & people?
The authors acknowledge their bias and include a diagram in which they plot financial success and social responsibility:
They conclude: “Despite all the rhetoric, we discovered that the correlation between the two sets of data is, well, zero… Though many articles suggest that responsible corporate behavior – say, in sustainability – will automatically improve your bottom line, clear it’s not as simple as that.” I read the graph differently: as there is no correlation, shareholder value can not be the excuse not to act socially responsible and adopt a multi-stakeholder perspective in business? In an interview with no. 2 on the list, Jeffrey Bezos from Amazon says: “We take it as an article of faith that if we put customers first, other stakeholders will also benefit, as long as they are willing to take the long-term view.” Later in the article the authors themselves make the case of four leaders who do well (top 15) by doing good: Adidas, Inditex, Hermès International and Eaton.
What makes a CEO successful? Having an MBA degree! “In the wake of the financial crisis, MBA’s were accused of being value destroying. We supplied the debate with some contrary data in 2010, showing that the average MBA ranked 40 places higher in the study sample than the average non-MBA. We saw similar results in this year’s list.” What does this prove? “Nudge, nudge, say no more, say no more,” I can only conclude with Monty Python.
The ranking has value. The authors look at the long-term financial success of CEO’s and the focus is global. But it’s still waiting on a more team-based and fully multi-stakeholder perspective of management and leadership.
PS: Steve Jobs is even posthumously the no. 1 of all CEO’s…