The Good CEO

There are plenty of ethical corporate leaders. Here are just a few who built enduring U.S. companies without bending the rules

It was a crucial moment for Aramark Worldwide Corp. (RMK ) After months of negotiating and millions spent on due diligence, the $7.8 billion outsourcing service company was close to wrapping up deals for a pair of overseas acquisitions. The target companies fit perfectly with Aramark's goal of expanding internationally, and the price--more than $100 million--was right, too. But when Chief Executive Joseph Neubauer finally got a close look at the operations and books, he didn't like what he saw. Despite the huge investment in time and money, he didn't think twice. Neubauer walked away. "It takes a lifetime to build a reputation, and only a short time to lose it all," he says matter-of-factly. "We chose to eat the loss on the time and the money because we couldn't live with their business practices."

An unerring sense of right and wrong should be a cardinal quality of any corporate leader. But at a time when a host of high-profile CEOs have been exposed as moral equivocators, out to build a fast fortune instead of a lasting enterprise, Neubauer stands out. The 1990s gave rise to the celebrity CEO, the larger-than-life hero who muscles his way to the top of an organization and by sheer force of will remakes it in his own image. But with that myth shattered by the likes of Kenneth Lay, Dennis Kozlowski, Bernard Ebbers, and other disgraced corporate chieftains, it's time to reassess the very nature of leadership.

That's why BusinessWeek decided to look at those who, like Neubauer, built solid, enduring companies in the age of Enron. Despite the ugly headlines, there are still many such executives out there. Our search for those who embodied the best in management excellence began with a simple premise: Where we saw superior corporate performance over many years, we would find a superior leader. We focused on companies that had exemplary earnings and sales growth both over time and against their peers. The companies of each of the CEOs we selected have outperformed the broader market, some by huge percentages. We also included measures of management skill, such as return on invested capital. Most important, perhaps, we drew on our own analysis of how well these leaders met the challenges facing their companies.

We weren't sure what characteristics would set these bosses apart, but Jim Collins, author of Good to Great, gave us a few hints. While studying corporations that made the leap from good to exceptional performance, Collins found that every one of the CEOs shared an essential trait: a burning ambition focused on their companies--not themselves. "They looked a little like tofu," he says. "They were clearly part of the meal. They seemed to be integral to the nutrition of the meal. But they did not stand out. Everything else was the spice."

Such unsung chief executives abound. We selected six to feature here. Although responsible for over $80 billion in shareholder wealth and the livelihoods of hundreds of thousands of employees, most are unfamiliar names. They don't run glamorous companies. Indeed, many, like Harold Messmer Jr. of staffing company Robert Half International Inc. and James Keyes of automotive supplier Johnson Controls Inc. (JCI ), work in mundane industries. One, Colgate-Palmolive Co.'s (CL ) Reuben Mark, wouldn't even comment for this story, citing his belief that talking to the press does nothing to improve his operations.

But comportment is not the only way in which these CEOs defy the management ideal of the 1990s. None of them are "change agents" or recent recruits charged with remaking culture or strategy. In fact, they have led their companies an average of 18 years and worked in them for an average of 26 years. James D. Sinegal, of Costco Wholesale Corp. (COST ), co-founded his company 19 years ago, while James C. Morgan has been in charge at Applied Materials Inc. for 25 years.

Different companies, of course, require different skills. What works for a Silicon Valley tech shop may not work for a retailer. These six reflect that. They come from diverse backgrounds and industries. Their styles and strengths vary. What they share, however, is a passion for their companies. It drives them to study and refine even the smallest details. It turns them into constant communicators of company values. It compels them to seek people outside the normal CEO orbit, from factory workers to suppliers to customers, to give them the insights they need to run their companies better.

Armed with an almost molecular understanding of their organizations, these leaders are confident taking risks and invariably plan for the long term. Yes, they may go through tough periods when their companies or their industries are stagnating. But they're constantly thinking ahead to the next change of cycle. Morgan, for instance, invested several hundred million dollars last year in a new research lab, even though his industry has never been in worse shape.

Ultimately, though, each of these CEOs leads in his own way. They're not always popular. They're certainly not perfect. But they've been more right than wrong, and they've done better than survive: They've thrived. Together, they provide an unusual picture of what true leadership looks like.

By Nanette Byrnes, with John A. Byrne in NewYork, Cliff Edwards and Louise Lee in San Mateo, Calif., Stanley Holmes in Seattle, and Joann Muller in Milwaukee

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