India's Best CEOs

India's Best CEOs across diverse sectors

- 

The C-Suite Extraordinaire

Fortune India-EY study reveals that India's Best CEOs across diverse sectors have one thing in common – high return ratios. BY V. KESHAVDEV

WHAT IS THE HALLMARK OF A GREAT CEO?

While the checklist, in this day and age, can be an exhaustive one, the one attribute that will rank among the top three is being a good capital allocator.

Yet, as Warren Buffett observed, very few CEOs make the cut when it comes to efficient deployment of capital. In his annual letter to Berkshire Hathaway shareholders in 1987, the Sage of Omaha wrote: “The heads of many companies are not skilled in capital allocation. Their inadequacy is not surprising. Most bosses rise to the top because they have excelled in an area such as marketing, production, engineering, administration, or sometimes, institutional politics. Once they become CEOs, they must make capital allocation decisions, a critical job that they may have never tackled and that is not easily mastered…”

The barometer to gauge efficient capital allocation is return on capital employed (ROCE) — the profit earned by a company on its capital. Hence, the Fortune India Best CEOs 2022 ranking has 1/4th weightage towards ROCE. The three-year CAGR for revenue and PAT and total shareholder return make up the remaining 3/4th. (See Methodology: Page 122).

Deliberating on the rankings that covered 13 sectors and four revenue categories — Super-large, Large, Mid-size and Emerging — the eight-member jury concurred that management strategy can be a subjective exercise, measuring financial returns is not.