TEXT OF INTERVIEW
Kai Ryssdal: Business and economic types are as interested in who’s hot and who’s not as the rest of us are. So when lists that rank big name corporate CEOs come out they get a lot of attention. And you always see the usual suspects. Steve Jobs from Apple. Amazon’s Jeff Bezos, the chiefs of Microsoft, IBM and Disney, and all the rest.
Harvard Business Review, though, offers a different roster in this month’s magazine. Yes, Jobs and Bezos are there. But nowhere do you find the guys running IBM or Disney. In fact, the No. 2 and 3 slots on the list go to people you’ve probably never heard of — Yun Jong Yong runs the Korean electronics manufacturer Samsung, Alexey Miller’s at the Russian energy company Gazprom.
Management professor Morten Hansen from Berkeley helped come up with the list. And when we spoke I asked him how he decided who made the cut.
Morten Hansen: The criteria is that first of all it’s worldwide, it’s global. Secondly we looked at objective performance through their time in office — from the start to the finish. And Samsung’s Mr. Yong, he makes No. 2 because his numbers are so good. And that’s why he makes the list.
Ryssdal: Do some of the people who are on this list benefit from having joined the company when the company was, shall we say, not doing so well. I mean when Steve Jobs came back to Apple in ’97, they were in some trouble.
Hansen: Yes, and what we are seeing here is if you come in as a CEO, you have a better shot a high ranking — in other words exceptional performance — if you come in and take over a company that is under-performing, that has a low base. That was clearly the case with Steve Jobs coming back in 1997. Again, Mr. Yong taking over Samsung when it wasn’t doing so well. He was a 30-year veteran of Samsung, he took over as CEO, and he transformed the company into the kind of company that we know today.
Ryssdal: Yeah. Let me ask you about the metrics obviously. The one you guys concentrate on is share price, obviously. Because it’s the easiest and most trackable, I suppose. But there are a lot of other ways to measure the success of a CEO.
Hansen: Yes there is. And we’re concentrating here on the shareholder performance. What is important in this list is that we take a long term view. It is during the entire time in office. It is not in a quarter. It is not in year. It is how did you do from the first day on the job to the last day on the job, or until recently if you’re still in office. And through that long term lens, we look at shareholder return, and we adjust for industry affects, and we adjust for country affects, and we also look at market capitalization change. So we do a combination of measures to get a balanced view.
Ryssdal: That is sort of a conundrum though, the fact that you look on the long term. Because CEOs, certainly in the United States and elsewhere I imagine, are judged practically on a quarterly basis. Every time they make or don’t make their numbers that Wall Street’s expecting, they get a grade.
Hansen: That’s why we did this list. We did this ranking and all the research to reset how we measure performance of CEOs to the long term view. To say, it takes time to build great performance in a company and therefore we need to judge people on the long term. And on that basis, you’re getting a list that has some surprises. You’re getting Mr. Yong from Samsung, who did really well. But he may not show up in the sort of annual celebrity list of CEOs
Ryssdal: Yeah, that Venn diagram of celebrity CEOs and highest paid CEOs, and then the folks on your list. I mean, where do those circles overlap? Do they?
Hansen: No, they don’t do very much. For example, Barron’s did one in 2009 and the top 30 people on their list, only five of ours are in that top 30. Jamie Dimon of JPMorgan Chase is not on our list. Samuel Palmisano, IBM, is not. Jeffrey Immelt of GE is not. Now these might be good CEOs, but they’re not the real top performers if you take our measure of long term view.
Ryssdal: Morten Hansen, from the School of Information at the University of California, Berkeley, also INSEAD, the management school in Europe. We talked to him from France. Professor, thanks so much for your time.
Hansen: Thank you Kai.
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