INTERNATIONAL. Li Jiaxiang, a former military leader who steered Air China Ltd to membership of the largest global airline network, the Star Alliance, has been identified as China’s best-performing corporate leader in a new INSEAD ranking.
By applying skills he learned heading an army to the corporate world, Li (aged 62) increased industry-adjusted shareholder returns during his tenure (2004-2008) by 1,022 percent and added US$36.7 billion to the company’s market capitalisation.
The new business leaders’ ranking, prepared by INSEAD professors Xiaowei Rose Luo, Morten Hansen, Herminia Ibarra and Urs Peyer, and published in Harvard Business Review China, is the first-ever listing of corporate heads in China based on long-term stock market performance on the Shanghai and Shengzhen Stock Exchanges.
Highly-ranked leaders came from all sectors, with industrial, healthcare and energy industries only slightly over-represented. Among the top 50, three are women and only one is a foreigner. Whether the leader’s firm was state-controlled or not did not seem to affect their rankings. Neither does their age, tenure at the firm before taking the leadership, or business education. Only four of the top 50 have an MBA degree.
The rest of the Top 5
Ranked number two, Wang Dongming (60), the chairman of Citic Securities, pursued a strategy of international diversification to reduce risk. Under his leadership Citic Securities became the first Chinese securities company ever listed on both mainland and Hong Kong stock exchanges.
The number three spot went to Dong Mingzhu (58) from Gree Electric Appliances, one of the “Top 50 Most Influential Business Women” according to US Fortune Magazine and a believer in internationalisation. She focused the company on the airconditioning market foregoing opportunities to diversify.
At number four, Li Jianhong, head of China International Marine Containers Group is the only MBA holder in the top 20, while fifth ranking is Guo Wencan, chairman of mainland China’s largest cement company, Anhui Conch Cement Company.
What they delivered
The ranking was based on a survey of 509 leaders from 244 companies which outperformed other corporations in the same industry between January 1995 and March 31, 2012. The nation’s top 50 corporate heads delivered a total shareholder return of 472 percent on average during their average 6.8 years tenure, compared to 997 percent returns delivered by CEOs in the global list (average tenure 8.8 years). That works out to a compound annual return of 33 percent well above the S&P500’s 2010 annual return of 9.87 percent.
A key factor that came out of the research is that size does matter: the smaller the better. Those who took the lead in smaller companies rank higher, while their counterparts who took over larger firms performed more poorly. “This was not the case in similar rankings of India’s CEOs. It seems that in China there is more room in relatively smaller firms for leaders to tap into growth potential and improve firm performance,” author Luo said.
The prior performance of a company also mattered, Luo noted. “Chinese leaders have a better shot at performing well during their tenure if they inherit a poorly-performing company.” And the better-ranked the predecessor’s performance, the more poorly-ranked is his or her successor. “This may suggest that the Chinese market has become competitive, making it hard for top performers to stay at the top.”
Click here for the full list of China’s 50 top-performing corporate leaders.
To watch the video interview with INSEAD Entrepreneurship and Family Business professor Xiaowei Rose Luo, please click here.
This article is republished courtesy of INSEAD Knowledge
Copyright INSEAD 2012