ESG-rating firms praise Inditex’s transparency in managing, monitoring, and auditing its supply chain. Measured on financial returns alone, Isla comes in 18th in our ranking his company’s performance on environmental, social, and governance (ESG) factors, which count for 20% of a leader’s score, propelled him to the top spot.
This allows it to keep inventories low and jump on trends to get new merchandise into stores quickly. (For more on our methodology, see “How We Calculated the Rankings.”)Īmong apparel retailers, Inditex stands out for two things: Its success in helping consumers easily migrate between physical stores and online shopping, and its “proximity sourcing” system, under which more than half of production takes place close to home. We continue to view the ranking as a work in progress and to look for ways to improve the methodology-but this year we made no changes to our measurement system, which accounts in part for the lack of big surprises. Unlike rankings that are based on subjective evaluations or short-term metrics, our list relies on objective performance measures over a chief executive’s entire tenure-numbers that often hold steady. (Most of the rest, including the CEOs of Heineken and Vodafone, dropped off because of a significant decline in stock price.) On average, these 100 CEOs generated a 2,507% return on stock (adjusted for exchange-rate effects) during a 17-year tenure, for a 21% average annual return. Of the 28 CEOs who fell off the list after last year, 11 retired from their companies. Seventy-two of last year’s 100 leaders are repeats, and 23 are appearing for the fourth straight year. Two of this year’s top three CEOs were among the top three leaders in 2016, and 16 of the top 25 were in the top quartile. The power of momentum is evident in our 2017 ranking of the world’s best-performing CEOs, a list that is remarkably consistent with last year’s tally.
In an accompanying interview with HBR senior editor Daniel McGinn, Isla discusses some of the factors-a flat structure and an informal management style “proximity sourcing,” or production close to home and a continual focus on sustainability-that have propelled the company’s success. Heading this year’s list-his first time in that spot-is Pablo Isla of Inditex, the parent of several retail fashion chains including Zara and Pull&Bear. A company achieves excellence, he wrote, by “relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough.” The power of momentum is evident in HBR’s 2017 ranking of the world’s best-performing CEOs-the 100 leaders who have delivered top results on both financial and ESG measures over their entire tenures, which average 17 years. More than 15 years ago Jim Collins, the author of the management best seller Good to Great, introduced the flywheel as a metaphor for the enduring power of strong business leadership.
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