The Paradox of CEO Excellence When Success Rides Industry Tailwinds

Introduction

When The Economist selected Armin Papperger of Rheinmetall as the best CEO of 2025, the choice appeared straightforward on the surface. His company delivered 158% shareholder returns, won major contracts, expanded into new markets, and demonstrated remarkable resilience despite Russian assassination attempts. Yet this selection illuminates a more complex question that business leaders must confront: What truly constitutes exceptional CEO performance when macroeconomic and geopolitical tailwinds do much of the heavy lifting?

The article's methodology began with the S&P 1200 index, ranking companies by excess shareholder returns relative to their sectors, then filtering for CEOs with at least three years tenure. From the top ten, The Economist systematically eliminated candidates for poor past performance, governance concerns, or excessive reliance on luck. Papperger emerged as the winner not only for his financial results but for his foresight in championing European defense before Russia's 2022 invasion of Ukraine made such positioning fashionable or profitable.

This selection process reveals as much about our current approach to evaluating leadership as it does about Papperger's capabilities. The emphasis on shareholder returns as the primary metric, while standard in business journalism, deserves scrutiny when applied to industries experiencing unprecedented external demand shocks.

The Attribution Problem in CEO Performance

Separating CEO skill from favorable circumstances represents one of the most persistent challenges in leadership evaluation. Research from the National Bureau of Economic Research suggests that industry and macroeconomic factors account for approximately 60% of variance in company performance, while CEO effects contribute only 15-20%. The remaining variance comes from company-specific factors beyond CEO control.

European defense contractors collectively experienced extraordinary growth in 2025. The continent's defense spending increased dramatically following Russia's continued aggression in Ukraine and uncertain American security commitments under the Trump administration. This rising tide lifted virtually all boats in the sector. While Papperger's Rheinmetall outperformed peers, the question remains: How much of this outperformance reflects superior leadership versus operational advantages, existing contracts, or positioning established by predecessors?

The Economist acknowledged this attribution problem by eliminating gold mining executives whose returns largely reflected gold's 65% price increase. Yet defense contractors face a similar dynamic. The decision to exclude gold miners while celebrating defense executives appears somewhat arbitrary, suggesting an implicit judgment that defense contractor CEOs exercise more agency over their results. This assumption warrants examination.

Papperger's genuine strategic foresight before 2022 strengthens his case considerably. Leading Rheinmetall since 2013, he invested in defense capabilities when European politicians were reducing military budgets and public opinion viewed the industry skeptically. This contrarian positioning required courage and conviction, qualities that distinguish exceptional leaders from competent managers riding favorable trends.

However, even this foresight benefited from circumstances. The 2014 Russian annexation of Crimea provided early signals that eventually proved prescient. Leaders in other industries who made equally bold contrarian bets that failed simply never appear on lists of top CEOs, creating survivorship bias in our evaluation frameworks.

Beyond the Numbers: The Character Question

The Economist's emphasis on Papperger's personal courage in the face of assassination threats introduces a dimension often missing from CEO evaluations: character under pressure. After German and American intelligence agencies foiled a Russian plot to kill him in 2024, Papperger enhanced security but continued his work undeterred. This remarkable composure distinguishes him from executives who retreat when facing far less serious challenges.

Leadership scholarship increasingly recognizes that crisis response reveals character in ways that steady-state management cannot. Research by Harvard Business School professor Nancy Koehn on crisis leadership demonstrates that the most effective leaders display unusual calm, clear thinking, and commitment to mission when facing existential threats. Papperger's response to assassination threats exemplifies these qualities.

Yet this raises uncomfortable questions about whether we should celebrate leaders whose work inherently involves life-and-death stakes. Defense contractors operate in a morally complex space where business success correlates directly with geopolitical instability and loss of life. The more successful Rheinmetall becomes, the more weapons flow into conflict zones.

This ethical dimension does not appear in The Economist's evaluation framework, which focuses exclusively on business metrics and governance. This omission reflects a broader tendency in business journalism to compartmentalize ethical considerations from performance assessment. Such separation becomes increasingly untenable as stakeholder capitalism gains prominence and younger employees demand that their employers align profit-seeking with social responsibility.

The Governance Filter and Its Limitations

The article's elimination of candidates for governance concerns deserves credit for recognizing that strong returns cannot excuse ethical lapses or oversight failures. The exclusion of Fujikura's CEO following embezzlement by a subsidiary head, and Hanwha Aerospace's CEO amid suspicious share issuance allegations, demonstrates appropriate minimum standards.

However, the governance filter applied appears relatively narrow, focusing on clear misconduct rather than broader questions of corporate responsibility. Robinhood's Vladimir Tenev received consideration despite his company paying $75 million to settle regulatory probes. The article notes this as a mark against him but not disqualifying, suggesting a high tolerance for regulatory friction provided it does not indicate systematic governance failure.

This pragmatic approach reflects business reality where regulatory settlements have become routine, particularly in financial services and technology sectors pushing boundaries of existing frameworks. Yet it also normalizes a pattern where companies seek forgiveness rather than permission, paying fines as a cost of doing business while executives claim ignorance of subordinates' actions.

More robust governance evaluation would examine whether CEOs establish cultures of compliance or cultures that view regulations as obstacles to overcome. It would assess whether boards provide genuine oversight or rubber-stamp management decisions. It would consider stakeholder impacts beyond shareholders, including employees, customers, communities, and the environment.

The exclusion of Dave Mosley at Seagate for poor performance between 2017 and 2024 before AI demand rescued the company demonstrates appropriate skepticism about recent success following extended mediocrity. This temporal lens should become standard in CEO evaluation, guarding against recency bias that overweights recent results while ignoring historical patterns.

Industry Context and Competitive Positioning

Rheinmetall's success under Papperger reflects not only favorable industry conditions but also specific competitive advantages he either created or exploited effectively. The company's expansion into naval shipbuilding through a September 2025 acquisition demonstrates strategic vision beyond simply scaling existing operations.

This diversification within defense shows sophisticated portfolio management. Naval capabilities represent long-term investments requiring different expertise than ground-based weapons systems. The willingness to expand into adjacent sectors during a boom period, rather than simply maximizing margins in core business, suggests confidence in sustained demand and ambition beyond short-term optimization.

Comparing Rheinmetall's approach with peers provides additional context. BAE Systems and Thales, major European defense contractors, also grew substantially in 2025 but focused primarily on executing existing backlogs and securing contract extensions. Rheinmetall's more aggressive growth strategy, including significant capital investments in manufacturing capacity, positions the company for continued outperformance if European defense spending remains elevated.

This strategic positioning creates path dependencies that could advantage Rheinmetall for years. However, it also concentrates risk if geopolitical tensions ease or public opinion shifts against military spending. The bold moves that generate superior returns during expansion could create excess capacity and financial strain during contraction.

The Memory Chip Makers: When Technology Trumps Management

The article's consideration and ultimate rejection of memory chip executives Sanjay Mehrotra of Micron and Kwak Noh-Jung of SK Hynix illustrates another evaluation challenge: industries where technological capability determines success more than managerial skill.

Both companies benefited enormously from providing high-bandwidth memory for AI data centers, a position achieved through years of research and development investment. The Economist credits Kwak specifically for SK Hynix's consistent R&D investment despite industry cyclicality, making his company the world leader in HBM technology.

This recognition of patient, counter-cyclical investment represents sophisticated analysis. Many semiconductor executives cut R&D during downturns, creating permanent disadvantages when markets recover. Kwak's resistance to this pattern demonstrates strategic discipline that directly enabled his company's current success.

Yet the article still excludes both chip makers, suggesting that positioning in the AI supply chain owes more to technological capability than management excellence. This judgment seems overly harsh. Technology companies require leaders who understand technical roadmaps, make appropriate investment decisions, and position their organizations for emerging opportunities. These represent core CEO responsibilities.

The exclusion may reflect an implicit bias toward industries where CEO decisions more directly impact results, or where leadership qualities appear more visible and relatable to general business audiences. Memory chip manufacturing operates largely invisibly to most observers, making it difficult to identify and celebrate specific management decisions even when they prove crucial to success.

The Foresight Premium

Papperger's strongest claim to the best CEO title rests on his demonstrated foresight from 2013 through 2022, when he championed European defense despite unfavorable political and social conditions. This contrarian positioning required seeing beyond prevailing consensus to identify emerging trends before they became obvious.

Foresight represents perhaps the most valuable CEO capability because it enables positioning before opportunities or threats fully materialize. Leaders who recognize pattern shifts early can reallocate resources, develop capabilities, and establish market positions that create sustained advantages. Those who wait for consensus lose first-mover benefits and often find themselves responding to competitors' initiatives rather than shaping market evolution.

However, distinguishing genuine foresight from lucky guesses proves difficult in real time. The business landscape is littered with failed contrarian bets that seemed visionary when made. For every CEO whose prescient positioning creates enormous value, many others make similar contrarian choices that destroy value when their predictions prove wrong.

This asymmetry creates a survivorship bias in how we evaluate and celebrate foresight. We remember and reward those whose bets succeeded while forgetting those whose similar reasoning led to failure. This pattern encourages excessive risk-taking by executives seeking to establish reputations as visionaries, potentially destroying more value than genuine foresight creates.

A more balanced evaluation would examine not just whether a CEO's contrarian positioning succeeded, but whether their reasoning was sound at the time, whether they appropriately sized their bets relative to uncertainty, and whether they adapted as new information emerged. Papperger appears to score well on these dimensions, gradually building Rheinmetall's capabilities rather than making a single all-in bet.

Alternative Evaluation Frameworks

The shareholder return focus in The Economist's methodology reflects standard financial analysis but ignores increasingly important performance dimensions. Stakeholder capitalism, while sometimes invoked cynically, raises legitimate questions about whose interests CEOs should serve and how we should measure their success.

Employee welfare and development represent one alternative metric. CEOs who build organizational capabilities, develop talent, and create cultures where people thrive generate value that may not immediately appear in stock prices but proves durable over time. Research by the Great Place to Work Institute consistently shows positive correlations between employee satisfaction and long-term financial performance, though causality runs in both directions.

Customer value creation offers another lens. CEOs who genuinely solve customer problems rather than simply extracting maximum revenue build sustainable competitive advantages. Amazon's Jeff Bezos made customer obsession a core principle, sometimes accepting lower margins to improve customer experience, creating enormous shareholder value over time.

Environmental and social impact provide additional dimensions, particularly relevant for defense contractors. While Rheinmetall's weapons serve legitimate defensive purposes, the industry's environmental footprint and role in conflicts deserves consideration in comprehensive CEO evaluation.

Innovation and industry advancement represent yet another metric. Some CEOs not only grow their companies but advance entire industries through technological breakthroughs, business model innovations, or ecosystem development. Their impact extends far beyond their organizations, creating spillover benefits that standard financial analysis misses.

The Courage Factor

Returning to Papperger's response to assassination threats, this dimension of leadership deserves more attention than typical CEO evaluations provide. Physical courage rarely factors into executive assessment because few business leaders face such extreme threats. Yet the psychological qualities that enable someone to continue working effectively while targeted for assassination likely correlate with other valuable leadership attributes.

Courage to maintain convictions despite opposition, courage to make difficult decisions with incomplete information, courage to acknowledge mistakes and change course when necessary - these forms of courage prove essential for executive effectiveness even when physical safety is not at stake.

Papperger demonstrated professional courage before 2022 by championing an unpopular industry and investing in capabilities when public opinion and political trends moved in opposite directions. His physical courage in 2024-2025 reinforced evidence of character that goes beyond strategic positioning or operational excellence.

This suggests that CEO evaluation should weight character and temperament more heavily than current frameworks typically allow. While skills and experience prove necessary for executive success, character determines behavior under pressure when stakes are highest and outcomes most uncertain.

The Long View

One year of exceptional returns provides insufficient evidence for claims about CEO excellence. The most meaningful test comes over full business cycles including both favorable and adverse conditions. Papperger's twelve-year tenure offers more data than single-year snapshots, though even this period has been relatively favorable for defense contractors after 2022.

The truly great CEOs demonstrate consistent excellence across different conditions, adapting strategies to changing circumstances while maintaining core principles. They build organizations with enduring capabilities rather than optimizing for current conditions. They develop leadership benches ensuring their companies thrive beyond their tenures.

These longer-term considerations suggest that definitive CEO rankings remain premature until careers conclude and full impacts become visible. The best we can do mid-career is identify leaders demonstrating excellence in their current context while acknowledging uncertainty about how their decisions will play out over time.

Papperger's strategic positioning since 2013 provides more confidence about sustained excellence than one exceptional year would allow. His investments in manufacturing capacity, expansion into adjacent markets, and development of technological capabilities suggest someone building for long-term success rather than maximizing short-term results.

Broader Implications for Leadership Evaluation

The Economist's analysis, while sophisticated, illustrates persistent challenges in CEO evaluation that the business community has yet to fully resolve. We lack consensus on appropriate time horizons, how to weight different stakeholder interests, how to separate skill from luck, and how to incorporate ethical considerations into performance assessment.

Progress requires moving beyond single metrics toward multidimensional frameworks that capture leadership complexity. Such frameworks should consider financial results but also organizational capability development, innovation, stakeholder impacts, governance quality, and character under pressure.

They should employ longer time horizons that capture full business cycles and strategic consequences of current decisions. They should attempt to separate CEO contributions from industry trends and macroeconomic conditions, acknowledging the inherent difficulty of such attribution.

They should recognize that different situations require different leadership capabilities. The skills needed to lead a company through crisis differ from those required for steady-state management or aggressive growth. The best CEO for a defense contractor differs from the best CEO for a technology startup or a retail chain.

Most fundamentally, they should embrace uncertainty and avoid false precision. Declaring anyone the best CEO based on one year of data represents intellectual overreach, even when supporting analysis is sophisticated. We should celebrate excellence where we see it while maintaining appropriate humility about the limitations of our evaluation frameworks.

Conclusion

Armin Papperger deserves recognition for building Rheinmetall into a European defense leader through strategic foresight, disciplined investment, and personal courage. His twelve-year tenure demonstrates sustained excellence in positioning the company for geopolitical shifts that many peers missed or ignored. His response to assassination threats reveals character that transcends typical executive challenges.

Yet proclaiming him the best CEO of 2025 overstates what we can reliably conclude from available evidence. His success reflects not only leadership excellence but also favorable industry conditions driven by tragic geopolitical circumstances. Other leaders in less fortunate sectors may have demonstrated equal or greater skill while generating lower shareholder returns.

The more important lesson from this analysis concerns how we evaluate leadership and what criteria should matter most. As business faces increasing scrutiny about its role in society, executive assessment must evolve beyond shareholder returns toward frameworks that consider multiple stakeholders, longer time horizons, and ethical dimensions alongside financial performance.

The best CEOs create sustainable value for multiple stakeholders while building organizational capabilities that endure beyond their tenures. They demonstrate foresight in anticipating change, courage in pursuing contrarian strategies, discipline in execution, and character in handling pressure. They balance short-term demands with long-term positioning, recognizing that truly great companies require patient investment in people, capabilities, and culture.

Papperger exhibits many of these qualities, making him a worthy candidate for recognition. Whether he proves to be 2025's best CEO remains unknowable until more time passes and broader context emerges. For now, we can acknowledge his excellence while maintaining appropriate skepticism about rankings that claim more certainty than the evidence supports.

Business leaders should draw several lessons from this discussion. First, be cautious about attributing success or failure entirely to CEO decisions when industry and macroeconomic factors prove dominant. Second, evaluate executives across multiple dimensions rather than fixating on single metrics. Third, extend evaluation timeframes to capture full strategic cycles. Fourth, consider character and values alongside skills and results. Finally, embrace uncertainty rather than seeking false precision in leadership assessment.

These principles can improve how boards evaluate sitting CEOs, how they conduct succession planning, how investors assess management quality, and how business media covers executive leadership. They acknowledge the genuine difficulty of separating skill from luck while still recognizing that leadership quality varies considerably and matters enormously for organizational outcomes.

The question of who was 2025's best CEO may prove less important than the conversations such rankings generate about what constitutes leadership excellence and how we can identify and develop it more effectively. If The Economist's analysis prompts such reflection, it will have served a valuable purpose regardless of whether Papperger proves the right choice.