As the US steps back from the fiscal cliff, Japan unveils a $116 billion stimulus, and Europe struggles with sovereign debt, it is difficult for investors to know where to put their money. Gold reached an all-time high last June and art markets break records, but what the world economy really needs is investment in corporate equity markets. And what investors need is confidence in corporate leadership.
In good times corporate investors may blithely follow the stock exchange indices, but in difficult times, when company collapse and leadership failures take over the business headlines, they need more in depth guidance on how companies are being led. In lieu of a reliable ‘leadership index’ perhaps the next best thing would be an index of CEO performance.
This month’s Harvard Business Review publishes the valuable findings of research into CEO performance around the world by Professor Morten T. Hansen (University of California Berkeley, and INSEAD), Professor Herminia Ibarra (INSEAD) and Associate Professor Urs Peyer (INSEAD).
This is HBR’s Summary: For years, people have bemoaned executives’ zealous focus on short-term results, which often leads CEOs to make moves that undermine their firms’ long-term prospects and, some say, act irresponsibly. But all the talk won’t change anything if the business world doesn’t adopt a new way of measuring performance. Three professors from INSEAD believe they have the answer: an innovative scorecard that evaluates CEOs on the basis of the results they delivered over their entire tenures in office. It incorporates three metrics: industry-adjusted shareholder returns, country-adjusted shareholder returns, and increase in market capitalization over that time frame.
Using this scorecard, the authors have studied and objectively ranked the performance of thousands of CEOs of major corporations around the world. In this issue, we reveal who made it into the top 100. This is the second instalment of the ranking, which we published for the first time three years ago. Since then, the authors have expanded the group of CEOs studied, making it even more global. And, recognizing the growing sentiment that great financial performance is no longer enough, they also looked at social and environmental ratings to see which of the top CEOs also did well on those metrics.
Read: The Best Performing CEOs in the World, Harvard Business Review January-February 2013