Last week, Harvard Business Review (HBR) issued its 2015 list of the world’s top CEOs. The list is an interesting one, especially when compared to last year’s. Some dramatic changes are evident, due in no small part to a shift in methodology.
This year, for the first time, HBR inserted additional criteria on environmental, social and governance (ESG) performance. ESG ratings, in the new system, which were derived from information provided by Sustainalytics, accounted for 20 percent of the overall ranking. That was enough, in some cases, to reshuffle the deck quite a bit.
Of particular note was the fact that Jeff Bezos of Amazon fell spectacularly from the No. 1 spot last year, all the way down to No. 87. Amazon’s financial performance, the sole criteria for last year’s list, was nothing short of phenomenal, making the largely self-made Bezos, with a net worth around $50 billion, a hero to the likes of Forbes. However, the company’s performance in the ESG realm, at least as reported for this survey, was considerably less so.
Amazon, which as recently as 2012 was dubbed a “no-show” on sustainability by Marc Gunther, only hired its first sustainability executive just over a year ago. Add to that the rather damning recent New York Times piece on Amazon’s brutal workplace culture, with its copious mentions of ulcers and tears besieging the ranks of its workforce, and you see another aspect of the company that, until recently, nobody seemed to care much about. According to the survey, Bezos ranked No. 828 out of a pool of 907 in the ESG category.
It also bears mention that the evaluation of companies is not only subjective, but can vary widely depending on exactly what criteria are used. This is borne out by the fact that Amazon was just recently rated No. 1 for corporate social responsibility (CSR) by the Reputation Institute.
Another victim of the reordering was Hugh Grant, the CEO of Monsanto, another company that has received both very high and very low rankings in the CSR department. HBR dropped Grant from No. 7 last year to No. 66 (and there are those out there who would add a third six to that number.)
On the brighter side, the No. 1 ranking this year went to a very deserving Lars Rebien Sørensen of Novo Nordisk. The company has consistently been ranked among the top companies for CSR, and received numerous awards, including several top rankings.
In this interview with HBR, you can see a number of rather refreshing aspects of this man, not least of which are his consensus leadership style, the fact that he was one of the lowest paid CEOs on last year’s list, and that he doesn’t use a private jet (despite the company’s $140 billion market cap and $13.3 billion in sales last year) because he feels that doing so would distance him from other employees.
While the company has sometimes been criticized for deriving so much of its revenue from diabetes treatment, not only has it branched out into preventative measures like dealing with the epidemic of obesity, but it’s also in the late stages of developing an oral form of insulin, which will be very disruptive to the market.
Susanne Stormer, Novo Nordisk’s VP of sustainability, had the following comment on the HBR announcement and the review’s decision to include non-financial metrics.
“We appreciate the intent of the new rating methodology to ‘stimulate debate about the importance of non-financial measures.’ For some years now, we’ve seen many examples of how a more holistic business approach pays off in a number of ways – often measured by intangibles such as ‘license to operate,’ stakeholder trust, employee engagement, customer satisfaction and brand preference.
“There’s a strong body of academic research that points to social and environmental factors as value drivers. And there are numerous ESG rating methods that seek to identify what factors will differentiate companies’ prospects of future success. So, there is ample documentation for a correlation between financial and non-financial dimensions. Add to that mounting evidence of a causality, which is in effect what the new HBR method appears to subscribe to. Then we’re on to something really interesting.
“Imagine the implications of assessing CEOs by their performance in a 360-degree perspective and over time!”
As for Sørensen, she also had the following to say:
“Lars Rebien Sørensen’s leadership as CEO has taken the company to the next level of performance – setting a clear direction with a strategy focused on leveraging core competencies to improve health for the patients we serve, and inspiring everyone through his personal leadership style, clearly communicating what is right and what is not. He is enormously respected for the way he steers the business and leads people.”
Perhaps what impressed me the most about him was this comment he made to his employees, which he restated in his interview with HBR.
“If we wind up curing diabetes, and it destroys a big part of our business, we can be proud, and you can get a job anywhere. We’ll have worked on the greatest social service of any pharmaceutical company, and that would be a phenomenal thing.”
That might sound naïve, but can you imagine the brand equity that would derive from such an achievement? They could sell anything after that, and people would line up to buy it.
Image courtesy of Novo Nordisk