A recent study by the Reputation Institute indicated that Sundar Pichai of Google could be the world’s most reputable CEO, based on 28,000 individual ratings collected across the G15 economies. High praise indeed, but how has he earned this reputation?
Of course, Google is a staggeringly successful, global business, and the financials will go some way to securing Pichai’s approval rating, but CEO reputation is not all about the bottom line.
So, if that’s the case, what are the non-financial criteria that make for a truly great business leader?
The era of CEO activism
The study estimated that around one third of a CEO’s reputation is driven by CEO activism – essentially, do they behave ethically?
“There is a new era emerging in which the intangibles of reputation are driving political, social and economic change, and giving CEOs reason to reconsider their role as a leader,” said Stephen Hahn-Griffiths, chief reputation officer at Reputation Institute.
“To be relevant as a contemporary leader today, you need to be a CEO with conscience.”
The report highlighted that Pichai pledged donations to help countries after natural disasters, such as Puerto Rico after a hurricane, Mexico after an earthquake, and South Asia after flooding. He has also spoken out on matters of climate change and immigration.
Company culture matters
It’s not just the Reputation Institute – Pichai was rated in the top 10 CEOs on Glassdoor as well, with a 96% employee approval rating.
This probably does not come as a surprise, as the company regularly wins Glassdoor Awards for being one of the best places to work, and even anecdotally is widely acknowledged as having a cool company culture.
Glassdoor’s own report into top CEOs has found a strong link between company culture and management approval ratings.
Other contributing factors
Glassdoor’s report also highlighted that there is a sort of “founder effect” whereby founder CEOs are viewed more favorably than hired or promoted CEOs.
The compensation or salary received by a CEO is also a significant factor – in general, lower paid CEOs get higher approval ratings. However, it is worth noting that it is not as cut and dry as this, as improved corporate culture offsets the negative impact of CEO pay.
Another factor that comes into play, perhaps unexpectedly, is the industry the business is operating in.
The highest average CEO approval ratings come from real estate (76.1%), construction, repair and maintenance (72.8%) and information technology (72.6%). The lowest average approval ratings came from the transportation and logistics industry (64.3%), manufacturing (64.1%) and retail (61.4%).
The gender illusion
Interestingly, the Glassdoor study found that male CEOs received slightly higher approval ratings than female CEOs, on average.
However, women only made up around 5% of the sample, making it hard statistically to draw any meaningful conclusions. The report also points out that, once the myriad other criteria have been factored in, this perceived difference disappears.
“In essence,” the report says, “the perceived gap in CEO quality by gender is largely a statistical illusion.”
Glassdoor also reported that age, education and tenure has statistically insignificant effects on approval scores.
Overall, there are so many factors simultaneously at play that it is hard to pin down exactly the traits of a good CEO. However, it is encouraging to see that the make-up of an individual CEO has less to do with their approval ratings than their actions.
Striving towards a positive company culture and a social conscience could do wonders for PR, after all.
Recently, Real Business teamed up with breatheHR to find the UK’s top 25 SME Culture Leaders. You can read more about the selection process and the winners here.