Thought UK CEOs were in the vanguard of global business leadership? Think again

Just how good are our corporate titans, really? We like to think they’re masters of their craft, leaders in their field, potential world-beaters who can propel our businesses forward. At least, that’s how we’re encouraged to view them.

But how do they compare alongside their peers from across the globe? The current Harvard Business Review provides a clue, and pretty sobering it is too. It’s their annual ranking of the world’s best-performing 100 CEOs, and in all, only seven heads of British companies make the line-up, which is dominated by bosses from the United States.

There are none from the UK in the top 10, which is headed by Jensen Huang of graphics processor giant Nvidia. At 11th, comes our highest representative, Erik Engstrom of Relx. Simon Borrows of 3i is at 22. Then comes a long gap before Greg Case of Aon (73), Jean-Sebastien Jacques of RTZ (76), Pascal Soriot from AstraZeneca (77), Simon Wolfson of Next (78), and Diageo’s Ivan Menezes​ (84).

So, only two UK CEOs are in the top 50. There are four women in the top 100, and none of them are from Britain. At least that global figure of four (and they are all in the top half) is up from three in 2018, and just two in prior years. Each year when the list is published, says HBR, “some readers protest the paucity of women; each year we respond by saying it’s the result, not of the performance of female CEOs, but of how few women serve in the role – a phenomenon we, too, find regrettable”.

Seven British bosses out of 100 is not magnificent but it’s not bad either. However, it surely could, and should, be much better. Certainly, that is how our corporate chiefs come across – if you read the coverage here of the World Economic Forum at Davos for example, you could be forgiven for supposing UK CEOs were in the vanguard of business leadership. Not so, finds the HBR.

Tellingly, those at the very pinnacle of the world order are not unfamiliar entrants. Huang may be new at number one, but he’s no newcomer: he ranked second in 2018 and third in 2017. (Last year’s top performer, Pablo Isla, of the Spanish retailer Inditex, moved from CEO to chairman, taking him out of consideration for 2019.)

That consistency, says HBR, is typical of those at the top of its study. “Unlike rankings that are based on subjective evaluations or short-term metrics, it relies on objective performance measures over a chief executive’s entire tenure – and these ‘career numbers’ tend to hold steady. It’s no surprise, then, that 65 of last year’s CEOs reappear this year.”

They do so as well, despite a change in methodology. Since 2015, the ranking has been based not only on financial performance but also on environmental, social and governance (ESG) ratings. “For the past four years we’ve weighted ESG scores to account for 20 per cent of each CEO’s final ranking. This year we tweaked the formula, increasing that share to 30 per cent. The shift reflects the fact that a rapidly growing number of funds and individuals now focus on far more than bottom-line metrics when they make investment decisions.”

A key sign this year of this changing sensibility that reverberated around the business world came in August, when 181 US CEOs, who are members of the Business Roundtable, signed a statement affirming that the purpose of a corporation is to serve not just shareholders but four other groups of stakeholders: employees, customers, suppliers and communities.

The shift in ESG weighting did create one casualty: Amazon CEO Jeff Bezos. On the basis of financial performance alone, Bezos has been the top CEO every year since 2014. However, he failed to make this year’s list, owing to Amazon’s relatively low ESG scores.

Another characteristic of those who appear in the top 100 is their longevity. Says HBR, this illustrates, “how happy boards are to allow a high-performing leader to stay in the job for many years”.

Possibly as well, it shows how the more enlightened boards are prepared to stick with a CEO and give them the time they need to succeed. The CEOs of the Standard & Poor’s 500 largest publicly-quoted US companies have an average tenure of 7.2 years; by comparison, HBR’s best-performing CEOs have been in the job 15 years on average (although HBR, which excludes CEOs with less than two years’ tenure, may be a factor in why that number is so high.)

It’s certainly true of the majority of the British seven. Wolfson has been in post at Next since 2001, Borrows and Case from 2005, and Engstrom became head of Relx in 2009.

Consistent year-in, year-out performance; increased emphasis on, and serious regard for, ESG; and longevity of tenure – these are not typical phrases associated with the British boardroom approach and culture. We still place undue store on short-term performance, ESG is in its infancy, and we have a tendency to chop and change our chief executives with alacrity.

We need to support our CEOs; to encourage them; to give them the freedom and tools they require; and be prepared to allow them to make the occasional mistake and to learn the lessons from that. There’s a tendency to knock them for the slightest hiccup, to try to restrict their ability to manoeuvre and to demand their resignation when things go awry.

If we do that, who knows, we may end up with more than seven in the world’s top 100, and possibly, even a woman or two.