Deconstructing Fortune’s Businessperson of the Year List, part one

Fortune recently released its 2015 Businessperson of the Year List.

As the year draws to a close, publications such as the Harvard Business Review and Fortune are beginning to release their annual rankings of standout corporate leaders.

When HBR recently released the latest iteration of its 100 Best-Performing CEOs in the World list in the November edition of HBR Magazine, it did so with the announcement that, for the first time, the ranking was not “based exclusively on hard stock market numbers.” Rather, in a bid to take into account what the publication termed “the many aspects of leadership that go beyond mere market performance,” HBR took companies’ environmental, social and governance performance into consideration, weighting this so-called ESG component at 20 percent and financial results at 80 percent.

HBR’s new ranking approach hit some CEOs hard – most notably Jeff Bezos of Amazon, who came out on top last year and would have done the same in 2015 if the list remained purely financially focused. However, as Caldwell Partners detailed in a recent article, Amazon’s lackluster ESG performance dragged Bezos down to an overall position of 87. This left room for Lars Rebien Sorensen of Denmark-headquartered pharmaceutical company Novo Nordisk to take the No. 1 spot, in part due to his company’s philanthropic efforts, environmentally friendly practices and commitment to transparency.

The Fortune approach
Like HBR’s rankings, the newly released Businessperson of the Year List from Fortune Magazine – which was released in mid-November – prioritized leaders’ financial performance over other aspects, although it did not focus solely on this factor.

“Of course, intangibles and inspiration matter. But what counts most for companies is the ability to generate cold, hard cash,” asserted the list’s introduction.

An accompanying article by Fortune’s Stephen Valdivia, titled “Inside the Businessperson of the Year List,” provided a more in-depth look at the metrics used to rank the 50 CEOs represented on the list. These components included:

  • 12-month and 36-month increases in profits and revenue (the most important metric – “We wanted to identify companies that shone in the past year but eliminate any flashes in the pan who had a single good year after a slump,” Valdivia explained).
  • Corporate stock performance over 12-month and 36-month periods.
  • Shareholder returns over the past year and three years.
  • Each company’s ratio of debt to capital.
  • Strategic initiatives undertaken by the leader.
  • Business influence.
  • Leadership style.
HBR and Fortune's ranking metrics acknowledge that leadership is about more than making money.
HBR and Fortune’s ranking metrics acknowledge that leadership is about more than making money.

And the winner is…
Fortune awarded the title of Businessperson of 2015 to Nike CEO Mark Parker, who has more than doubled Nike’s revenue since taking the reins in 2006, overseeing growth from $15 billion to $31 billion. The Motley Fool pointed out that Parker has also been instrumental in the approximately six-fold appreciation of the company’s stock from about $20 to around $125. An introvert who refuses to leave his sneaker-designing past in the rearview mirror (according to Fortune, he still has a hand in designing limited-run shoes from time to time), Parker’s creative streak has helped him keep Nike ahead of the game.

“One of my biggest sources of angst is having people so comfortable with a formula that works that they are not challenging themselves or their ideas,” he recently told WSJ Magazine after being named the publication’s 2015 Brand Innovator.

Despite the accolades bestowed upon him by big-name publications such as Fortune and The Wall Street Journal, Parker has remained largely out of the limelight. His lack of media presence contrasts him against both his predecessor, Nike co-founder Phil Knight, and the No. 2 CEO on Fortune’s list, Facebook’s Mark Zuckerberg. However, the accomplishments outlined above speak for themselves – and, as The Motley Fool phrased it, “investors shouldn’t overlook his reserved manner because Parker is crushing it.”

“Facebook has had a profound impact on people around the world.”

The Facebook effect
Despite only being in existence for about a decade (the company turned 10 last year), Facebook has had a profound impact on how people around the world spend their time, express themselves and communicate with each other. Indeed, Fortune noted, one of every five minutes Americans spend on their phones is dedicated to using Facebook, a statistic that no doubt had an impact on Zuckerberg being listed at No. 2 on Fortune’s list. According to the Facebook Newsroom website, Facebook had 1.55 billion monthly active users and 1.01 billion daily active users on average in September of this year, many of whom accessed the site in a mobile capacity – 1.39 billion and 894 million, respectively. The company’s big-name subsidiaries, including Instagram and WhatsApp, have cemented its position as king of social media, and the story of how Facebook came to be was even immortalized in the Oscar-winning movie “The Social Network.”

In terms of Zuckerberg’s leadership style, a 2014 Inc. article by Ekaterina Walter, author of the book “Think Like Zuck,” detailed five notable aspects of the 31-year-old’s approach to running a company: a relentless focus on improving the product, a solid partnership at the top (in the form of Zuckerberg and Facebook COO Sheryl Sandberg), an approach to hiring that prioritizes cultural fit, a sense of purpose and a passion for a cause (in this case, the company’s mission statement of making the world “more open and connected”).

Rising from the ashes
Video game company Electronic Arts was once a key player in the gaming industry, but it went on to slide into the red due to a market shift away from designing games for consoles. Fortune’s No. 3 Businessperson of 2015 was instrumental in reversing EA’s decline and reestablishing it as a force to be reckoned with. After taking the helm in late 2013, Andrew Wilson assessed the current industry conditions and adjusted the company’s areas of focus accordingly by establishing a “player-first” culture, prioritizing quality, developing platform-agnostic products and expanding into the digital space.

“When we think about competition, we think about you as a player and what you’re engaging with through the day,” Wilson told VentureBeat’s Dean Takahashi back in June. “We know that we need to engage with you a certain amount of time per day in order to maintain that relationship. That might mean we’re competing with another console developer, another mobile developer. The world has woken up and recognized that interactive entertainment is the best form of entertainment. All of a sudden everyone is trying to do what we do. We get up and we’re looking left, right, front, back and trying to make sure the experiences we deliver to our players are the most entertaining, most rewarding, most inspiring experiences possible.”

“EA’s Andrew Wilson keeps a finger on the pulse of consumer trends.”

Essentially, Wilson’s moves are all about ensuring the organization keeps a finger on the pulse of consumer trends, thereby preventing a recurrence of EA’s previous decline – falling out of touch with its customer base. So far, his approach seems to be working. Citing figures from S&P Capital IQ, Fortune noted that EA was able to accumulate $875 million in earnings in 2014, and 2015 is shaping up to be another good year thanks to the release of hotly anticipated games such as November’s “Star Wars: Battlefront.”

The top three names on Fortune’s Businessperson of the Year List belong to innovators who have bolstered their companies’ revenues, captured the attention of consumers and made smart choices based on current market conditions. In part two, we’ll take a look at the two careermen rounding out the top five before touching upon some of the other highlights of the 50-strong list.

About Caldwell Partners
Caldwell Partners is a leading international provider of executive search and has been for more than 45 years. As one of the world’s most trusted advisors in executive search, the firm has a sterling reputation built on successful searches for boards, chief and senior executives, and selected functional experts. With offices and partners across North America, Europe, Latin America and Asia Pacific, the firm takes pride in delivering an unmatched level of service and expertise to its clients.