No. 1:

James McNerney, Boeing

Age: 58

Education: B.A. in American studies from Yale; Harvard Business School
Previously: CEO of 3M; several executive positions at GE, including president and CEO of GE Aircraft Engines; McKinsey; Procter & Gamble

You would have trouble inventing a more sterling résumé for a CEO than the one already possessed by Boeing’s James McNerney. A graduate of Yale and Harvard Business School, McNerney had run General Electric’s Asia and jet-engine businesses when he was tabbed as one of three possible candidates to succeed Jack Welch.

The job, of course, went instead to Jeffrey Immelt. But after leaving GE, McNerney turned around the struggling consumer and electronics giant 3M, and took over Boeing in July 2005.

For overseeing the aerospace and defense firm’s comeback, McNerney edged out former colleague Immelt in our survey of best industrial-sector CEOs, a particularly star-studded group that also includes FedEx’s Fred Smith and John Deere’s Robert Lane.

When McNerney arrived, Boeing was attempting to extricate itself from a variety of ethics scandals, ranging from accusations of industrial espionage to allegedly corrupt dealings with the Department of Defense, its largest customer. Our survey respondents credit him with cleaning things up. “Boeing has made a remarkable comeback after various missteps and crooked business dealings, and I believe its comeback against Airbus is due heavily to McNerney,” says Sigmund Goodwin, an analyst at a private bank.

Boeing’s shares are up more than 50 percent since McNerney took the helm, about double the performance of the S&P 500 over the same period. Perhaps more importantly, he has strengthened Boeing’s position against Airbus, its European rival. This year’s launch of the recently delayed 787 Dreamliner, which uses composite materials to make the plane more economical and friendly to the environment, was the biggest ever (in number of orders) for a commercial airplane.

McNerney has sometimes referred to his leadership strategy as getting “ignition” from his employees, which he achieves by expecting a lot from his workers and encouraging them to apply their personal values to their professional lives. “If the people who run our company grow, the company’s growth will follow naturally,” he says. “So I ask them to model leadership, to teach it, measure it, expect it and reward it.”

Executive Fact:
Is it in the genes? McNerney’s father was a professor at Northwestern’s Kellogg School of Management.

A Word on Methodology

We compiled our list of 100 CEOs by starting with several hundred of the largest American corporations in terms of annual revenues. We then divided the list into the 10 economic sectors used by Standard & Poor’s Global Industry Classification Standard, and determined that each should contain a minimum of five companies.

We culled the list to 100 firms after considering a variety of objective factors (revenues, earnings, market cap, returns, sustained excellence) in addition to other, more subjective reasons, and determined the final list by committee.

We then asked our readers to grade each company’s CEO on a scale that correlated to 1 through 6, whereby 1 = below average; 2 = average; 3 = good; 4 = very good; 5 = exceptional; and 6 = the very best. There was also a category for “do not recognize”; we strongly encouraged respondents to rank only those executives they closely track. Whoever received the highest average score in each sector was the winner.

We sent the survey to a proprietary list of 80,000 hedge-fund managers, professional traders, private-equity professionals and investment bankers, asking them to include their age, company and job title. The results are confidential, though we did ask respondents whether they would mind being contacted later for comments about their selections, some of which are printed here.

Furthermore, those surveyed were asked to name the most outstanding CEO in each sector, and why, and to list five retired CEOs they most admired and five new or up-and-coming CEOs to watch.

For executives who have been CEO for fewer than three months prior to the survey, which took place in late September, we listed both the company’s previous and new CEO.

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