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Dollars and Sense

BestPerformingCEO2015-LarsSørensen-Blog

Show us the money!

For years, a CEO’s performance was based on profitability. Is the company meeting or exceeding expectations? Are shareholders getting satisfactory returns? Is the board of directors happy? The bottom line was the bottom line.

Business is still about making money, of course, but the metrics for assessing a CEO are changing – and that’s a good thing. Look no further than the recently released Harvard Business Review annual ranking of the world’s leading chief executives. No. 1 on the list is Lars Sorenson of Novo Nordisk, a Denmark-based healthcare corporation that focuses on diabetes treatment. Yes, Novo Nordisk boasted some very impressive numbers, but the company also drew high marks for its proactivity concerning social and environmental issues.

“If we keep polluting, stricter regulations will be imposed, and energy consumption will become more costly,” Sorenson 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.”

Whoa! A big-time CEO with a conscience? This is getting interesting.

The Harvard Business Review also deserves a hearty round of applause for expanding the criteria for assessing a CEO’s effectiveness. The publication, in acknowledging that leadership encompasses more than just financial performance, “added a measurement of the company’s environmental, social and governance (ESG) performance, which was calculated by the investment research firm Sustainalytics.” Financial metrics comprised 80 percent and ESG 20 percent of each CEO’s score.

Is it just a coincidence that the top five CEOs last year were all Americans, led by No. 1 Jeff Bezos of Amazon, who tumbled to No. 87 because of the company’s relatively lower score on the ESG metrics, the Review reported. U.S.-based companies may excel at generating revenue, but apparently lag behind when it comes to social and environmental concerns. Three American CEOs ranked in the top 10, led by No. 2 John Chambers, who retired from Cisco Systems earlier this year.

Following Sorensen and Chambers were Pablo Isla, Inditex; Elmar Degenhart, Continental; Martin Sorrell, WPP; Stephen Luczo, Seagate Technology; Jon Fredrik Baksaas, Telenor; George Scangos, Biogen; Michael Wolf, Swedbank; and Fujio Mitarai, Canon.

For what it’s worth, the career website Glassdoor, earlier this year released its rankings of the best CEOs to work for at U.S. companies. Based on anonymous employee responses, the top five were Google’s Larry Page; Nike’s Mark Parker; H-E-B-s Charles Butt, founder of the San Antonio-based grocery chain; Facebook’s Mark Zuckerberg; and Ultimate Software’s Scott Scherr.

By the way, according to the Harvard Business Review, Sorenson earns less than a number of his colleagues on the list and doesn’t fly on private jets (“that would send a signal to my subordinates that my time is more valuable than theirs”).

Hey, this could be the start of something big.

 

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