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BLACK852078_852093P1BW08501D-0-W02900-1---XAA.G. Lafley Procter & Gamble, CEO since ’00 Why: Hasn’t let bigger get in the way of better Lafley says he’s a big believer in keeping one’s word, and he is doing just that as he approaches the second anniversary of his $57-billion merger of consumer products giants Procter & Gamble and Gillette. Lafley, 59, has made good on a promise to trim $1 billion-plus annually from the new P&G. He has also presided over some big marketing splashes. With the in- troduction of such winners as the Gillette Fusion razor and Tide with Febreze “freshness,” P&G was responsible for five of 2006’s top 10 new packaged goods for consumers, in the view of market researcher IRI. Such new products have helped the company post solid, organic sales growth of 5%-7%, despite the headwinds of higher commodity and and energy costs. Lafley is now pushing hard into Asia, Central and Eastern Eu- rope and Africa. But for all his products and markets, his vision is strikingly simple: to be “one team with one dream.” For inves- tors, whose holdings already have nearly doubled in Lafley’s ten- ure, it’s a sweet dream. —Robin Goldwyn Blumenthal Allan Moss Macquarie, CEO since ’93 Why: The venturesome spirit to follow the open road No one will begrudge Moss if he becomes Australia’s best- paid executive in 2007. For the year ending March, his firm, Aus- tralia’s biggest investment bank, is set to post its 15th consecutive year of profit—A$1.3 billion, up more than 50% from last year. Under the 14-year reign of the mild-mannered banker, Macquarie has snatched up tollroads, airports, and trophy properties around the world, on the theory—correct, as it turned out— that steady-return in- frastructure investments will meld perfectly with pension funds’ long- dated obligations. Macquarie, which controls the Indiana Tollroad and the Chicago Skyway, is said to be eyeing the New Jersey Turnpike as well as a range of other assets. It’s at the forefront of a trend that saw some $150 billion of infrastructure assets change hands last year. That activity can be intensely lucrative: When Macquarie advises a privatization, it can provide financing to a buyer or perhaps lease the asset itself. Running a tollbooth has never been so much fun. —L.P.N. John Mackey Whole Foods, CEO since ’80 Why: Capturing the growth poten- tial in natural food Mackey likes his job so much that he decided earlier this year to eliminate virtually all of his compensation. For $1 a year, he’s adroitly guiding the pioneer of natural and organic grocery stores into a new era of growth and competition. With everyone from Wal-Mart to Safeway muscling in on natu- ral foods, Mackey is fighting back by offering a “whole lifestyle”— prepared gourmet meals, linens, music and food supplements. He continues to expand the 190-store chain and has inked a smart deal to buy smaller rival Wild Oats. Wall Street has pounded the stock by 25% over the past year, but don’t sell Mackey, 53, short. His insights allowed him to build the business he created in 1980. Not only was he early to natural foods but he was among the first to see the promise in “food- ies,” those affluent, well-educated people who crave good eats. In giving up his pay, Mackey said Whole Foods already has given him more money than he ever dreamed of. With any luck, investors may soon be able to say the same. —R.G.B. Lakshmi Mittal Arcelor Mittal, CEO since ’76 Why: Forging a global steel empire Want to know how India be- came a leading incubator of multinationals? Read the story of Lakshmi Mittal. The 56-year- old tycoon took over Arcelor last year for Œ26.9 billion ($35.8 bil- lion), creating the world’s largest steel company and greatly ex- panding an empire he started in the 1970s. Mittal, long a producer of low- cost steel, was an early advocate of industry consolidation and bought downtrodden plants in Mexico and Kazakhstan. Then, when the world began demand- ing more steel, Mittal was off to the races. Today, he owns 44% of the Rotterdam-based company, which has annual sales of about $89 billion and produces 120 million tons of steel a year, or about 10% of global production. With a personal fortune esti- mated at $32 billion—Arcelor Mittal, after all, is busy returning cash to shareholders by paying out a big dividend and repur- chasing shares—Mittal is now investing in Indian refineries and scouting for energy assets overseas. —L.P.N. Richard Kovacevich Wells Fargo, CEO since ’98 Why: King of the cross-sell. In an industry with more than its share of ups and downs, Ko- vacevich has made Wells Fargo a paragon of predictability. The San Francisco-based banking giant has increased its earnings at an annualized 12% over the past five years and shows little sign of slowing. Kovacevich (pronounced Koe- VAH-suh-vich) shuns the big ac- quisitions fashionable among other banks, preferring to grow organically. Nor is he keen on massive share repurchases, opt- ing instead to husband capital for expansion. His main mantra is cross-sell- ing. He wants to cement rela- tionships with customers by of- fering multiple banking products—deposits, credit cards, home mortgages, auto loans. The average retail customer has over five products from Wells, far above the industry norm. True, Wells could get dinged in the subprime mortgage mess; it’s a big originator of the loans. But as Wells points out, it’s also a careful originator. Ultimately, the crisis may be a boon for Kovacevich, thinning out weak rivals. —A.B. Terry Leahy Tesco, CEO since ’97 Why: Best-of-breed grocer with glo- bal ambitions If there’s no greater flattery than the attentions of Warren Buffett, Tesco, the big British su- permarket chain, had ample rea- son to blush earlier this year. The Oracle of Omaha revealed that his Berkshire Hathaway had acquired a stake of nearly 3%. It’s easy to see why. CEO Terry Leahy has Tesco expanding its best-in-class operations around the world. Unlike most retailers, it has not only managed to defend itself against U.S. giant Wal-Mart on its home turf in the U.K., but has thrived there. One of every three British pounds goes through Tesco’s cash registers. Now, Leahy is about to execute a long-planned invasion of Wal-Mart’s backyard, opening stores in Los Ange- les, San Diego, Las Vegas and Phoenix. He’s also expanded into China and Turkey. Leahy always has taken Tesco’s founding credo to heart: “Pile it high and sell it cheap.” Profits, too, have piled up, helping investors reap returns of 400% over Leahy’s tenure. Investors’ smiles may soon be greeted by the frowns of U.S. grocery store owners. —V.J.R. 20 40 60 80 $A100 ’07 2006 2005 MBL / Australia 0 15 45 30 $60 ’07 2006 2005 MT / NYSE 50 55 65 60 $70 ’07 2006 2005 PG / NYSE 0 10 20 $30 ’07 2006 2005 TSCDY ADR / OTC WFC / NYSE 25 30 35 $40 ’07 2006 2005 WFMI / NNM 30 45 60 75 $90 ’07 2006 2005 Annualized Price Change One Year 8.1% While CEO 10.6% S&P 500 4.7% 2007 P/E 12.7 5-Yr. Profit Growth 12% Annualized Price Change One Year 5.9% While CEO 15.3% S&P 500 1.2% 2007 P/E 19.4 5-Yr. Profit Growth 10% Annualized Price Change One Year 27.8% While CEO 17.6% S&P 500 7.6% 2007 P/E 19 5-Yr. Profit Growth 13.7% Annualized Price Change One Year -25.2% While CEO 20.8% S&P 500 10.7% 2007 P/E 31.7 5-Yr. Profit Growth 18% Annualized Price Change One Year 37.3% While CEO 6.2% S&P 500 6.5% 2007 P/E 6.1 5-Yr. Profit Growth NM Annualized Price Change One Year 23.0% While CEO 26.2% S&P 500 7.7% 2007 P/E 15.1 5-Yr. Profit Growth 23.5% 44 B A R RON ' S March 26, 2007
