I like the idea behind the Harvard Business Review’s new ranking of long term CEO performance.
HBR’s ranking used to be based on shareholder return and change in market capitalization. But of course these measures don’t take account of environmental and social impact. And they can be misleading because financial incentives often skew CEOs toward short termism to maximize share price. So this year the HBR has introduced a measure of environmental, social, and governance performance. The editor explains:
“HBR’s ranking of CEOs is meant to be a measure of enduring success. We track and analyze each CEO’s performance starting from day one of his or her tenure. Our goal is to create a list that gets beyond the most recent quarterly or even annual results and truly evaluates long-term performance...
Our view is that, in an era of big data and greater transparency, consumers and investors increasingly want to understand a company’s culture and values. They want to analyze its social behavior, not just its share price. These new measurements will only get better over time.”
Weighting financial results at 80% and 20% for environment, social and governance, Jeff Bezos, CEO of Amazon, drops from #1 position based on financial results only, to 87. The ranking is based on data from Sustainalytics.
