Harvard Business Review (HBR) recently released its annual ranking of the “best-performing” CEOs in the world — and 10 retail CEOs made the cut this year.
Used to evaluate a CEO’s long-term performance, the rankings are traditionally based on total shareholder return and the change of each company’s market capitalization. But in a change this year, HBR also evaluated each CEO on his or her company’s environmental, social, and governance (ESG) performance based on calculations from Sustainalytics. Long-term financial results were ultimately 80% of the valuation, while the ESG performance made up 20%.
HBR also changed its rankings system to include CEOs who were in their role before 1995. In the past, these executives were excluded because some of HBR’s data didn't go that far back. The publication now evaluates these CEOs with only returns generated from 1995 to 2015, for which it has data.
Ten retail CEOs made the list, but perhaps the most notable development came with the ranking of one CEO in particular: Jeff Bezos, who held the No. 1 spot last year, fell to No. 87 on the list. Other shifts in the rankings include Fast Retailing’s Tadashi Yanai falling from No. 11 to No. 35, while Inditex’s Pablo Isla rose from No. 14 last year to take the No. 3 spot.
Many of these shifts are associated with the changes in HBR’s ranking system. L Brand’s chief executive Leslie Wexner, for example, founded the retailer in 1963, which is the primary reason why he was added to the list this year after being excluded in years past.
As for Bezos’ drop in the rankings, Amazon has actually seen a better year in 2015 than in 2014, at least from a shareholder perspective. The e-commerce giant's share price has risen this year, while it actually fell last year. But Bezos’ steep drop in HBR's rankings may have less to do with shareholder returns, and more to do with the searing expose of its corporate environment published by the New York Times in August, despite the company taking steps to address grievances aired in the piece. Bezos comes in first in HBR's financial ranking, but his ESG ranking is 828th — the lowest of any retail CEO on HBR's list.
The highest ranked retail CEO on the list is Pablo Isla, CEO of Inditex, the owner of the Zara fast-fashion chain and the world’s largest clothing retailer. Inditex added 94 new stores in 35 markets in the first half of this year, with net sales up 17% in the first half of 2015. The retailer’s stock has risen 25% this year, with the company valued at 92 billion euros. Inditex's vertically integrated operations help it react quickly to the latest trends, delivering fresh merchandise to stores twice a week — an inventory model that's seeing success more millennials gravitate from traditional “teen” retailers to more fast-fashion stores.
Below you will find the full list of the CEOs classified in the “Retail” category by HBR. Notably, there are two retail CEOs that made the rankings last year but didn’t make the cut this year: Michael Balmuth of Ross Stores and Michael Kowalaski of Tiffany & Company.
Pablo Isla, Inditex
Rank on list: 3
Financial Ranking: 20
ESG Ranking: 49
Leslie Wexner, L Brands
Rank on list: 11
Financial Ranking: 14
ESG Ranking: 275
Simon Wolfson, Next
Rank on list: 28
Financial Ranking: 50
ESG Ranking: 308
Tadashi Yanai, Fast Retailing
Rank on list: 35
Financial Ranking: 9
ESG Ranking: 509
Blake Nordstrom, Nordstrom
Rank on list: 38
Financial Ranking: 61
ESG Ranking: 328
John Mackey, Whole Foods
Rank on list: 43
Financial Ranking: 44
ESG Ranking: 447
Terry Lundgren, Macy’s
Rank on list: 56
Financial Ranking: 74
ESG Ranking: 402
Carol Meyrowitz, TJX
Rank on list: 81
Financial Ranking: 59
ESG Ranking: 588
Jeff Bezos, Amazon
Rank on list: 87
Financial Ranking: 1
ESG Ranking: 828
Larry Merlo, CVS Health
Rank on list: 91
Financial Ranking: 80
ESG Ranking: 533