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BW Businessworld

Methodology: Ranking CEOs — A weighty Exercise

If you think CEOs have it tough, have another think about how “heavy” we had it to rank them by Team BW

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While it is said that people make a team, a leader is the one in charge of providing strategic direction and laying out a road map for growth. A leader’s foresight, dynamism and vision are strategic in achieving the goals of a company and keeping all stakeholders, such as suppliers, shareholders, vendors and customers, happy. But, even as the debate hots up about how much CEOs contribute, we at BW believe that due credit must be given to them because ultimately leadership matters even more.

Our annual “Most Valuable CEO” exercise was carried out in association with our knowledge partner, Cedar Management Consulting. Ace Equity, a database provider, collected the raw data to start with. We collated this, taking the “BSE 500 companies” as the foundation, which as always gave us the base and the representative range of listed companies. From these, we profiled the “Most Valuable CEOs” and ranked them on a bunch of parameters.

First, we applied a set of filters to generate a list of companies whose performances could be calibrated. We considered companies and CEOs with at least a three-year tenure, with a trading history of a minimum 700 days in the last three years, and where revenues have been greater than Rs 250 crore for the 2015-16 fiscal.
We sorted the filtered database into four categories: heavyweight (revenue more than Rs 20,000 crore), very large (revenue between Rs 7,500 crore and Rs 20,000 crore), large (revenue between Rs 2,500 and Rs 7,000 crore) and medium (Rs 250 crore to Rs 2,500 crore).

The methodology to evaluate performance of CEOs focused on a combination of financial factors and corporate governance.

We took into account revenue, market capitalisation and profit CAGRs for the last three years, and the weighted average return on capital employed (RoCE). We used compound average growth-rate figures rather than absolute figures to account for ebbs and flows in the economy and to even them out. Each of the four financial strength parameters was given a 25 per cent weighting within categories — and a percentile ranking was done by category.

Further, we applied corporate social responsibility and other governance parameters to the database, those matching the 2 per cent CSR spending norm according to The Companies Act, 2013, and the existence of 50 per cent of the board’s directors as independent.

The overall financial score was given a 60 per cent weight and the environmental, social and governance (ESG) score, a 40 per cent weight. We then once again reviewed a CEO’s role and ensured eligibility.

We are happy to present here the top CEOs from the Heavyweight, Very Large, Large and Medium categories.