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. 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.

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. 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 the management writer Jim Collins introduced the flywheel as a metaphor for the enduring power of strong business leadership. A company doesn’t shift from “good to great” overnight, he wrote in his 2001 book of that name. Rather, it achieves excellence by “relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough, and beyond.” And once that flywheel starts spinning, Collins said, it tends to keep going.





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. 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. Seventy-two of last year’s 100 leaders are repeats, and 23 are appearing for the fourth straight year. Of the 28 CEOs who fell off the list after last year, 11 retired from their companies. (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.

There are reasons for this consistency. 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. 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. (For more on our methodology, see “How We Calculated the Rankings.”)

ETHAN HILL Listen to and read the full interview

This year’s top performer—his first time in that spot—is Pablo Isla of Inditex, the parent of the retail fashion chains Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, and Uterqüe and of the housewares retailer Zara Home. Since becoming CEO, in 2005, Isla has led Inditex on a global expansion during which the company has opened, on average, one store a day. That growth has increased its market value sevenfold and made it Spain’s most valuable company. Colleagues describe Isla’s management style as humble and at times almost shy. Although he spends much of his time traveling to visit stores, he rarely attends store openings, choosing to avoid the limelight. At headquarters he prefers management by walking around over holding formal meetings—part of his attempt to maintain an entrepreneurial, small-company culture even as the firm has grown very large.

Among 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. This allows it to keep inventories low and jump on trends to get new merchandise into stores quickly.

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. ESG-rating firms praise Inditex’s transparency in managing, monitoring, and auditing its supply chain. The company encourages consumers to bring worn-out clothing to its stores for recycling (in Spain it runs an at-home-pickup recycling program), and the Join Life brand of Zara, its largest chain, is produced using recycled fibers and with careful attention to the consumption of water and other resources.

20 of the CEOs lead companies based outside their countries of birth On average, they became CEO at age 44 and have been in office 17 years 29 have an MBA 32 have an engineering degree Only 2 are women 81 are insiders

If we judged CEOs solely on the basis of financial performance—as we did prior to 2015—the top-ranked leader would be Amazon’s founder, Jeff Bezos, who topped the list in 2014 and has been the best financial performer in every subsequent year. Since 2015, when ESG ratings became a factor in our ranking, Bezos has climbed from #87 to #76 to #71. To be sure, Amazon’s ESG ratings remain low: This year 88% of global companies scored higher on ESG measures. But those ratings are improving. The company’s massive Web Services division generates its own solar and wind energy. And in the past two years Amazon has hired several seasoned sustainability executives, creating optimism about changes likely to come.

Methodology & Data To compile our list of the world’s best-performing CEOs, we began with the companies that at the end of 2016 were in the S&P Global 1200, an index that reflects 70% of the world’s stock market capitalization and includes firms in North America, Europe, Asia, Latin America, and Australia. We identified each company’s CEO but, to ensure that we had a sufficient track record to evaluate, excluded people who had been in the job for less than two years. We also excluded executives who had been convicted of a crime or arrested. All told, we ended up with 898 CEOs from 887 companies. (Several companies had co-CEOs.) They ran enterprises based in 31 countries. Our research team, headed by Nana von Bernuth and assisted by the coders Christina von Plate and Phachareeya Ratchada and the data consultants Morand Studer and Daniel Bernardes of Eleven Strategy & Management, gathered each firm’s daily financial data from the CEO’s first day on the job until April 30, 2017, as compiled by Datastream and Worldscope. (For CEOs who took office before 1995, we calculated returns using a start date of January 1, 1995, because prior industry-adjusted returns were unavailable.) We then calculated three metrics for each CEO’s tenure: the country-adjusted total shareholder return (including dividends reinvested), which offsets any increase in return that’s attributable merely to an improvement in the local stock market; the industry-adjusted total shareholder return (including dividends reinvested), which offsets any increase that results from rising fortunes in the overall industry; and change in market capitalization (adjusted for dividends, share issues, and share repurchases), measured in inflation-adjusted U.S. dollars. We then ranked each CEO—from 1 (best) to 898 (worst)—on each financial metric and averaged the three rankings to obtain an overall financial rank. Incorporating three metrics is a balanced and robust approach: While country-adjusted and industry-adjusted returns risk being skewed toward smaller companies (it’s easier to get large returns if you start from a small base), the change in market capitalization is skewed toward larger companies. To measure performance on nonfinancial issues, HBR consulted with Sustainalytics, a leading provider of environmental, social, and governance (ESG) research and analytics that works primarily with financial institutions and asset managers, and with CSRHub, which collects, aggregates, and normalizes ESG data from nine research firms and works mainly with companies that want to improve their own ESG performance. We computed one ESG rank using Sustainalytics ratings and one using CSRHub ratings for every firm in our data set. To calculate the final ranking, we combined the overall financial ranking (weighted at 80%) and the two ESG rankings (weighted at 10% each), omitting CEOs who left office before June 30, 2017. HBR’s list of best-performing CEOs was conceived by Morten T. Hansen, Herminia Ibarra, and Urs Peyer. Previous rankings were published in HBR in 2010, 2013, 2014, 2015, and 2016, but the methodology was updated in 2015. Download the Data Behind the Ranking

Although all investors of course pay close attention to financial performance, there’s evidence that many are beginning to watch ESG measures carefully, too. Earlier this year Amir Amel-Zadeh of Oxford University’s Saïd Business School and George Serafeim of Harvard Business School published the results of a survey of 413 investment executives, whose firms collectively manage $31 trillion in assets. Half reported using ESG information because they believe it is material to investment performance, and nearly half said they believe that a company with a high ESG score is a less risky investment. Today money managers most frequently use ESG scores as a negative screen—they decline to invest in companies that have very low scores—but the managers surveyed said they expect that more investors will seek high-scoring companies over time and will use the scores to urge companies to do better. “Overall, the evidence in our sample suggests that the use of ESG information is driven primarily by financial rather than ethical motives,” the researchers write.

The CEOs listed deserve praise for excelling in both arenas.