The CEO of Mastercard for the past ten years is retiring at the end of 2021. He has delivered to shareholders a cumulative total return of +1,581%, which is five times that of the S&P 500. Concerning market cap, Mastercard is now the 21st most valuable company in the world, up from 256th when he took the job a decade ago.
During those ten years, Mastercard revenue is up an annualized 12.7%. Profit has climbed at an annualized rate of 18.7% and return on capital has soared at a rate of 40% per year. While Visa and American Express have done very well also, they don’t come close to the Mastercard results.
When the CEO was asked what were the key decisions he made which he believes drive the company’s incredible results, he focused on these two:
- Invest in Your People First – He is a strong believer in the principle that you must closely align the interests of employees with the interests of the company. In his words, “A stock plan aligns the interests of your two key stakeholders – employees and investors.” When he took the CEO job a decade ago, a minuscule number of employees were participating the company’s stock plans. Today 70% of employees get some kind of stock incentive award.
He further commented; “Today, if you are a Mastercard employee, and you save 6% of your salary into your 401(k) or your defined contribution plan, wherever you are in the world, we will give you an extra 10%, for a total of 16%. And we don’t have any deductions if you leave early.”
- Constantly Evolve Your Business Model – When he took the job ten years ago, he discovered that the company’s biggest competitor was not other forms of electronic payments, such as Visa or American Express. It was cash! Around the word, cash was 85% of all retail transactions. He commented: “How do you go after the 85% ? We found that our technology and our retail partnerships could make a big difference. That made it commercially sustainable.”
When the CEO took the job, the business was simply a credit card company, and a successful one, but the world was evolving. He jumped on three new approaches that have grown into very meaningful components of the business: debit cards, prepaid cards, and commercial cards. Additionally, all parts of our business have benefitted from a strong focus on mining its incredible data base of customer activities, powered by state-of the-art analytics and artificial intelligence.
As he summarized, “disintermediation of our own business is providing consumers and businesses with choice. Constant evolution of our business model is key.”
No doubt this leader provides a very robust example of how a leader needs to approach the business. It takes courage to drive constant change, but that is the key to enduring success!