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Why boards should use HBR’s list of Best-Performing CEOs in the World 2017 with caution

Harvard Business Review has recently published its annual Best-Performing CEOs in the World rankings.


Pablo Isla, Martin Sorrell and Jensen Huang are in first, second and third place respectively. Sean Boyd, Jean-Laurent Bonnafé and Ian Cook are placed 98th, 99th, and 100th.


Does this mean that your board should favour the first three over the last three as benchmarks for your CEO? The rankings suggest that you should. I disagree.



HBR has ranked CEOs using a weighting system, which favours financial performance over the other factors using an 80/20 ratio. “To calculate the final ranking, we combined the overall financial ranking (weighted at 80%) and the two ESG rankings (weighted at 10% each), omitting CEOs who left office before June 30, 2017”.


By two ESG rankings, they mean environmental, social and governance analytics as reflected in two scores: Sustainanalytics and CSRHUB. Directors who are shareholder-value merchants, red in tooth and claw, might wince at the inclusion of such wet factors. I argue the opposite: the weighting for the ESG factors is not high enough.


For example, Pablo Isla, CEO of Inditex, headquartered in Spain, is in first place while Ian Cook, CEO of USA based consumer goods company Colgate-Palmolive is in 100th place.


Let’s look at their comparative rankings: Isla scored 18, 76 and 142 for FINANCIAL, Sustainanalytics and CSRHUB respectively, whereas Cook scored 186, 167 and 89.



These suggest that while Pablo Isla outperformed Ian Cook in FINANCIAL and Sustainanalytics scores, Cook outperformed Isla in CSRHUB scores significantly. So what?


Let’s look closer at the providers of the ESG scores: “Sustainanalytics is a leading provider of environmental, social and governance (ESG) research and analytics that works primarily with financial institutions and asset managers and with CSRHUB which collects, aggregates and normalizes ESG data from nine research firms and works mainly with companies that want to improve their own ESG performance”.