In a recent Harvard Business Review article Chief Executive Officer Lars Sørensen at Novo Nordisk was selected as the best performing CEO in the world. Why?
The simple answer is truly sustainable growth—and ranking methodology.
The ranking was based on a brand new HBR rating criteria that attempted to balance sustained financial performance (weighted at 80%) with a mix of environmental, social, and governance (ESG) measurements (weighted at 20%) for the first time. While many other publications offer CEO scorecards, ESG factors are typically left out of such rankings.
In the article Sørensen notes the true linkage between these factors, “Corporate social responsibility is nothing but maximizing the value of your company over a long period. In the long term, social and environmental issues become financial issues.”
While many could argue for a higher ESG weighting, simply adding a 20% factor had a big impact on several notable CEO’s.
For example, in 2014 Amazon CEO Jeff Bezos earned the #1 ranking on this same list when HBR excluded ESG factors and used a solely financially oriented mix of total shareholder return and changes in market capitalization. This year, Jeff dropped to #87. Others were not as impacted.
Notably, John Chambers at CISCO made a small move from #3 in 2014 to #2 in 2015. And this year’s superstar Lars Sørensen moved to the top from his #6 position last year. That’s quite a jump.
This well-conceived and developed article serves the business community well in offering a fresh report card methodology for consideration.
The key points to take away have less to do with who ranks where and more to do with changing the definition of what success looks like.
To those who would prefer to continue using solely a short term financial report card, Sørensen offers the last word, “The business of business is business—but with a long-term perspective.”
Disclaimer: As a type-1 diabetic, Novo Nordisk products keep me alive. But my admiration for Lars goes beyond my personal need to my belief that with an ESG focus Novo Nordisk will help all of us thrive in generations to come.
In my view, Lars Sørensen will remain at the top of the rankings independent of the methodology chosen.
He is a true Chief.