BARRON'S COVER

| SATURDAY, MARCH 23, 2013

World's Best CEOs

By ANDREW BARY | MORE ARTICLES BY AUTHOR

Shareholder return is the mark of a great CEO. Shares of the companies run by this year's top managers have all beat the market during their tenure. From LVMH's Arnault to Lenovo's Yang.

Warren Buffett bluntly tells shareholders in his recent annual letter that if he can't increase Berkshire Hathaway's intrinsic value at a faster clip than the gain in the Standard & Poor's 500 index over a long stretch, there's little point in owning Berkshire stock. A low-cost index fund would be a better investment. As usual, Buffett is on to something, and he has delivered in a big way during 48 years as Berkshire's CEO. His stock is up 8,000-fold, turning many original investors into billionaires. Shareholder returns are a key criterion for inclusion in our ninth annual list of the 30 best CEOs in the world. We look for innovative and financially savvy leaders who can motivate employees and develop products that resonate with customers. But if they can't translate that into consistent profit growth and market-beating shareholder gains, they ultimately aren't adding a lot of value.

All 30 of the CEOs on our list for 2013 meet the Buffett test. The share prices of their companies have outstripped the S&P 500's return during their tenures. Some even have better annualized numbers than Buffett, although none can match Berkshire's total gain since 1965. Under Larry Fink, BlackRock's total return since its 1999 initial public offering has averaged 25.3% annually, versus 21% for Berkshire during Buffett's tenure. Even more impressive is what Amazon.com has done with Jeff Bezos at the helm since its 1997 initial public offering. The stock has risen to $253 from a split-adjusted $1.50, a 39% annualized return. Other CEOs whose shares have produced 25%-plus yearly total returns are Oracle's Larry Ellison, Monsanto's Hugh Grant, and three overseas chiefs: Pablo Isla of Inditex, which owns the Zara clothing retailer; Ma Huateng of Tencent, one of China's top Internet companies; and Yang Yuanqing of Lenovo, the fast-growing maker of personal computers that is giving fits to Dell and Hewlett-Packard . For the second straight year, there's a lot of turnover in our list, as 13 new CEOs are joining our shrine. Yang is among the newcomers, along with Leslie Moonves of CBS, Bernard Arnault of LVMH Mot Hennessy Louis Vuitton, David Cote of Honeywell, and Carol Meyrowitz of TJX . We try to set a high bar for keeping CEOs on our list. We removed 13 from last year's list. Some deletions were an easier call than others. Rex Tillerson of ExxonMobil is gone because the oil giant's production and returns are under pressure. Joe Tucci of EMC is out because revenue growth is slowing at the maker of datastorage systems. Lew Frankfort of Coach is off, as his firm's profit growth has slowed and the stock price has slumped. It's contending with competitive pressure in handbags and other accessories from hot brands like Michael Kors and Kate Spade. Our group is global. Sixteen CEOs come from the U.S., eight from Europe, four from Asia, and one each from Canada and Mexico. For profiles of the 30 leaders in alphabetical order click here. We don't rely on any formula to draw up this list. It's based on the views of Barron's reporters and editors, and reflects insights from investors, analysts, and industry executives. We like to see CEOs on the job for at least three years before we consider them, and we prefer a five-year minimum. It takes time to have an impact on a large organization, and developments in the initial year of a CEO's tenure often have more to do with what the predecessor did than any new initiatives. We made an exception for Google's Larry Page, who became CEO in 2011, because he's a co-founder of the company along with Sergey Brin and has played a key role in building the Internet giant into the country's third-largest company, with a market value of $270 billion. THERE ARE NO EASY JOBS at the helm of large companies, but some businesses are particularly hard due to narrow "moats" around their markets. A longtime member of our list, Michael O'Leary, heads Ryanair, the no-frills European airline that has thrived in a brutal industry. The outspoken O'Leary last week inked a huge order for Boeing 737s and defended the aircraft maker, saying "regulatory crap" was behind the grounding of its 787s amid concerns about battery fires.

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The pressures are unrelenting in retailing, and the CEOs of Japan's Fast Retailing and Spain's Inditex have done especially good jobs. Fast Retailing's Uniqlo chain and Inditex's Zara aren't well known in the U.S., but they have become two of the leading clothing retailers in the world. TJX has built a business with a $33 billion market value -- double that of Macy's -- by selling designer labels at sharp discounts in its T.J. Maxx and Marshalls stores. Shoppers like the treasure-hunt aspect of the stores and the ability to get a Michael Kors handbag for $150 that supposedly once retailed for $350. TJX somehow manages to regularly source enough designer stuff to fill almost 2,000 domestic stores. Credit CEO Carol Meyrowitz with that feat. You probably won't find Louis Vuitton bags at T.J. Maxx. CEO Arnault of LVMH zealously protects the image of his company's most important brand and insists that slow-selling items be destroyed rather than marked down or sold to off-price retailers. That attitude has helped create the world's top luxury-goods company. Moonves has generated strong returns through superior management of an old-media portfolio that was deemed to be inferior to that of Viacom, with its cable networks, at the time of the two companies' split in 2005.

CBS is the longtime leader in prime-time ratings, and Moonves has pushed hard to get paid for its costly content, wresting sizable annual "retransmission" revenue from cable operators. Sometimes we make mistakes in jettisoning CEOs. Warren East of ARM Holdings and Grant of Monsanto return to our pantheon this year. East, who announced last week that he would retire in July, has fended off larger competitors, notably Intel, to dominate the processor market for mobile devices. He goes out on a high note, with ARM Holdings shares at a record. Since we removed Grant in 2010, Monsanto has cemented its hold on the market for genetically modified seeds, and profits have rebounded. We welcome them back. We realize that readers may disagree with some of our selections or want to see other CEOs on the list. If you have any ideas, please write to editors@barrons.com. We look forward to your suggestions.