Steady as they go: in a year of chaos, the CEOs of CE's fifth MVA ranking added value to their companies by being just a little bit dull. . - Performance Measurement - Chief Executive U.S

Chief Executive, The, Dec, 2002 by Victoria Griffith

Humility, dependability and consistency weren't CEO personality traits sought by investors in the late 1990s. Yet those are exactly the characteristics cited by CEOs in this year's Chief Executive Top 25 Market Value Added (MVA) ranking as reasons for stellar performance.

"Maybe it's because I come from the Midwest where people tend to be more unassuming, but my father taught me the value of being humble," says Fred Bauer, CEO of Gentex, maker of high-tech automobile parts and No. 2 on this year's list. "Arrogance is death," he adds.

MVA is essentially a measure of the efficiency with which a CEO has used the capital at his or her disposal (see "MVA Methodology" p. 30). A quick comparison of the 2002 list with the 1999 rankings shows how rapidly the corporate world has changed. Three years ago, WorldCom, Microsoft, Yahoo! and America Online took the top four spots. WorldCom has since declared bankruptcy and America Online is in trouble. CMGI, an early leader in the Internet revolution, occupied the No. 23 spot in 1999 and boasted a share price of nearly $140. Now, the stock hovers around 50 cents.

This year's top CEOs are the kinds of leaders who would make any mother proud- stalwart, upstanding and wealthy to boot. Stryker, a medical equipment manufacturer and No. 8 on the list, is a model of "consistency and reliability," according to an analyst with Zacks Investment Research. Managers of hot Internet companies during the boom years would have cringed at such a description.

Not that the companies on this list are boring. A number are headed by risk-taking entrepreneurs--some you might not know--who have been with their companies since they were founded. Those include Dane Miller of Biomet, the medical equipment maker at the top of the ranking; Bauer of Gentex; and Michael Dell of Dell Computer in the No. 6 spot. Still, many say they place a premium on being trustworthy and have gone out of their way to instill a sense of ethics in their organizations.

"The important thing is not to make promises you'll have a hard time fulfilling, because then it's too tempting to perform accounting tricks to make sure you meet the numbers," says John Brown, CEO of Stryker. "We've always placed value in being consistent," he adds, "but we're also ambitious. We've delivered sales growth of 20 percent per year ever since I can remember, except in 1998 and 1999, when we were writing off acquisitions."

Many of the companies on the 2002 Top 25 list have already won Chief Executive accolades. A few, like Gentex, Stryker, Biomet and the health care group Cardinal Health, have appeared in the MVA Top 40 for three years running. In the past, however, they have been overshadowed by more flamboyant peers. This year, ostentation is out of style. "Flamboyance is O.K. if it's just an act," says Bauer. "If it's the real thing, it can be kind of scary for a company.

The fate of some previous winners shows how the mighty have fallen. "Some of the companies in the Bottom 25 for MVA this year once held lofty positions," says Al Ehrbar of Stern Stewart & Co., architect of the annual MVA list. Former high-flyers like Solectron, Brocade, Sun Microsystems and Microsoft now scrape the bottom for performance. A change in management at the top helped accelerate each of the plunges. Because the MVA formula includes leverage on a corporation's capital from the moment a CEO is appointed, it rewards longevity.

"If Bill Gates were still head of Microsoft, the company would have remained in the top 25," says Ehrbar. "It's a bias of the calculation, but a fair bias I think, because it's easier to manage an ongoing company than to build something up.

The Top 25 share a sharp focus on delivering quality products as a key to success. Passion--a term so overused during the Internet boom that it lost any real meaning--can be an important driving force when it's genuine, say CEOs.

"I've wanted to be involved in hip replacements ever since I started graduate school in 1969," says Biomet's Miller. "I love it, and that's important. My favorite customer is my mother, because she helps me to care about our other customers. If you're purely opportunistic, just in it for the money, sooner or later you'll get into trouble, as a few cases have proved recently."

Innovation is, as always, a driving force. Dell continues to advance its direct-delivery computer customization model. Gentex has made a name for itself with automatic dimming rearview mirrors. This year, it plans to introduce automatic dimming headlights. Biomet's hip replacements are made of high-tech titanium.

The entry of three biotechnology companies--Medicis at 17, Idec Pharmaceuticals at 22 and Gilead at 25-- proves long-term research-and-development investment can sometimes pay off in a big way. Investors this year cheered Gilead's new AIDS drug and other pipeline advances. Idec has grown sales of its cutting-edge cancer drug, Rituxan. Shares in these companies proved more resilient than most as the rest of the industry collapsed.