(FORTUNE Magazine) – Intensity of interest in our Most Admired Companies increases every year, so plenty of executives, directors, investors, shareholder activists, and researchers are sure to focus on a change we've made: Our ranking of the ten most admired, that list of all-stars at right, is now determined in a new way. For the first time, we asked all 12,600 ballot recipients simply to tell us which companies, regardless of industry, they admire most. Since those ballot recipients are the most knowledgeable people in U.S. business, their verdict yields the true A list.

Traditionalists will be relieved to know we perform the same underlying research we've done the past 16 years--every bit of it. We ask top executives, outside directors, and securities analysts to evaluate the companies in their industry on each of eight criteria (see "The Ups and Downs of the Industry Leaders"). In past years we picked out the top scores to create our top-ten ranking. But some industries could have been generally more lavish or stinting with praise than others, so the scores might not have been directly comparable. Now that potential problem doesn't arise.

The value of corporate reputation turns out to be a deep topic. Our survey has been the subject of countless research papers, dozens of corporate tracking studies, and at least one major university symposium. So dive into the pages that follow--or visit fortune.com for more data than they can hold. You'll be in good company. Apparently being admired has never been more valuable.

THE TOP TEN

1 General Electric 2 Microsoft 3 Coca-Cola 4 Intel 5 Hewlett-Packard 6 Southwest Airlines 7 Berkshire Hathaway 8 Disney 9 Johnson & Johnson 10 Merck

Never fall in love with a stock, investment advisers say. It's wise counsel, but you could be forgiven for ignoring it if the objects of your affection were the stocks of the ten most admired corporations in America. If you'd had the foresight to invest in these ten companies--General Electric, Microsoft, Coke, Intel, Hewlett-Packard, Southwest Airlines, Berkshire Hathaway, Disney, Johnson & Johnson, and Merck--you'd have a thoroughly diversified portfolio. You'd have transportation and financial services and consumer goods and capital goods and health care and information technology and entertainment, among other things. You'd own companies that make sugar water and shoes, sitcoms and spreadsheets, movies, medicines, and microchips, hardware and soft soaps, candy and dental floss. You'd have three companies more than a century old (GE, Coke, J&J) and two upstart startups still run by their founding entrepreneurs (Microsoft, Southwest). You'd have six of the 30 companies in the Dow Jones industrial average, including its oldest (GE) and two of its newest constituents (HP and J&J).

In their variety, America's ten most admired companies resemble the economy. But as they stand above the rest of corporate America in reputation, so do they tower over it in performance. If ten years ago you had bought $10,000 worth of Standard & Poor's 500 and reinvested your dividends, your estimable 17.92% annual rate of return would have compounded into $51,964 today. If you had, however, put $1,000 into each of this year's ten most admired companies, you would be sitting nearly three times prettier, with a portfolio worth $146,419.

Beauty is as beauty does, and what these companies do is gorgeous from almost any angle. In employee relations, for example, Southwest Airlines ranks first on FORTUNE's list of the 100 best companies to work for, and Microsoft, Merck, and Hewlett-Packard are also in the top ten. In market value added--a measure of how much wealth a company has created for investors--GE, Microsoft, Coke, Intel, and Merck place No. 1 through No. 5. (As the Stern Stewart consulting firm calculates it, MVA is the difference between all the money ever invested in a company and the total current market value of all its securities.) And for sheer wealth, GE, Coca-Cola, and Microsoft rank one-two-three in market capitalization among all U.S. corporations.

What's their secret? It can't be the industries they inhabit, because so many are represented here. But clearly some industries--automaking, chemicals, metals, petroleum refining--don't excite great admiration these days. Others, like tobacco, work against it. The secret can't be the products they make or even their ability to develop new ones. Some of these companies are awesome innovators, but you don't hear much talk about improving the flavor of Coca-Cola (been there, done that...), and Berkshire Hathaway chief Warren Buffett famously says he wants "simple businesses--if there's lots of technology, we won't understand it."

Top financial performance matters enormously but is not enough to make for a top reputation--necessary but not sufficient, as the phrase says. If you reranked all the public U.S. companies in Fortune's survey of corporate reputations by ten-year total return to shareholders, only one of the ten best-regarded--Microsoft--would also be among the ten best-rewarding.

The truth is that no one factor makes a company admirable, but if you were forced to pick the one that makes the most difference, you'd pick leadership. In Buffett's opinion, "People are voting for the artist, not the painting." Berkshire Hathaway, the masterpiece of America's second-richest man, hangs in this gallery alongside two others--Disney and Coca-Cola--in which Berkshire Hathaway has major investments.

To change metaphors abruptly: These CEOs have more talent than any lineup since the 1927 Yankees. Of Southwest Airlines' boss, FORTUNE asked in 1994, "Is Herb Kelleher America's Best CEO?" If not, it's only because of the other men on this list. It includes the two wealthiest Americans, Buffett and Microsoft CEO Bill Gates, each of whom owes every penny of his fortune to the company he created. Here's Andy Grove of Intel; Grove and Gates are called the Lords of Wintel, but they're really the Lenin and Trotsky of the desktop computer revolution, which humbled IBM, the bluest of all corporate blue bloods. Here's Michael Eisner, the most successful archaeologist since Howard Carter. Carter uncovered the tomb of Tutankhamen; Eisner unearthed and shined up billions of dollars of Walt Disney's buried treasure--and then with new films and new ventures built monuments worth tens of billions more. No longer here is the only CEO who might be Eisner's better at making a great brand greater, the late Roberto Goizueta--whose final and perhaps most remarkable accomplishment at Coca-Cola was that Wall Street never blinked when, at his death in October, he left the company in the deft hands of successor Douglas Ivester. (For portraits of all ten CEOs, see foldout section.)

There is, believe it or not, some academic literature that suggests that leadership doesn't matter. Microeconomists often discount it because it doesn't lend itself to equations. For example, its cost cannot be correlated with its value. The price of a great CEO is no more--and often much less--than the price of a crummy one. The services of Warren Buffett go for a measly hundred grand a year (plus a used jet), and he won't take stock options. A leader's output is hard to measure too. But it's there. Lew Platt became CEO of Hewlett-Packard five years ago. During the half-decade before Platt took charge, HP's total return to shareholders was a sleepy 4.6% a year. In the five years since, HP has returned an eye-opening 30.4% a year, compounded. Characteristically, the soft-spoken Platt would say he deserved little of the credit. Uncharacteristically, he would be wrong.

How else--except because leadership matters--can one explain why business people say that of the companies they most admire, they admire General Electric the most? It's not the best performer in the group in financial terms. "I give GE a B or B- on shareholder returns," says Alfred Rappaport, professor emeritus at Northwestern University's Kellogg School of Business and author of Creating Shareholder Value. Measured by the eight admirable attributes by which FORTUNE has previously compiled this list, GE has never ranked above seven and has cracked the top ten only three times since the list began in 1983. But when it comes to the whole--not the sum of the parts--GE is No. 1 and then some: It appeared on about 50% more ballots than runner-up Microsoft.

The reason is admiration for Jack Welch, who has rewritten the book on management while keeping GE huge, nimble, and immensely profitable. Welch and GE get credit not only for what they have accomplished during his almost 17 years at the helm but also for what they have avoided. Since 1981 nearly every other corporate behemoth--AT&T, Exxon, Ford, GM, Sears, IBM, Philip Morris, Prudential--has collided with serious trouble; one-time archrival Westinghouse has deconstructed and then morphed into a broadcast outfit. GE has stayed its industrial course and keeps getting better. Says Buffett: "People admire Jack for what he has done at GE more than they would if he had been at IBM and merely maintained it at the top. Before Jack, we thought GE was big and good, but not big and great."

What makes GE great? "Leadership," says Gertrude G. Michelson, who joined GE's board of directors in 1976, five years before Welch became CEO: "I've served on a number of boards, but GE is singular not only in its top leadership but in the institutional development of leadership. That's the outstanding attribute of the company, and it's largely a result of Jack's vision." Under Welch, GE spends upwards of $800 million a year on training and leadership development--about half what it spends on R&D. It's focused on spreading the word about Welch's vision, which Michelson describes as almost religious in its fervor: "how to anticipate change, how to cope with change, how to change a very big company that does many things well."

Welch may top this list of ten leaders, but he doesn't typify it. Nothing does--and therein hangs an important point. Every conceivable leadership style is represented by these CEOs. Welch is combative, tilts his head, and thrusts out his chin as if to say, "Go ahead, take your best shot"--and is never happier than when you do. Kelleher's a prankster and a kisser so unabashedly affectionate that his company's ticker symbol is LUV, so hands-on he has loaded baggage and served peanuts to passengers; he says, "I'm a naif about financials." Ivester--well, "undemonstrative" understates one aspect of the man, and "financial wizard" understates another.

Gates is said to be scathing about statements he considers stupid. Ralph Larsen of Johnson & Johnson says: "I try to encourage, to give people a sense of self-worth and self-esteem, to instill confidence. I don't want people doing what I say; I want them to sort it out for themselves." Welch sent Buffett a note that began "This is probably below your radar screen" when Berkshire Hathaway's jewelry subsidiary was considering taking its credit card business away from GE Capital. Buffett, for his part, says he and vice chairman Charlie Munger "delegate almost to the point of abdication."

Says Larsen: "Leadership to me is all a question of substance, not style." That remark gets an "A" from Harvard Business School professor John Kotter, who has spent decades studying executive leadership. Says Kotter: "At the level of style, you find great variation among great leaders, but beneath style--in the content of leadership--are uniformities that fit all of them." Kotter lists three, but we can add two more, and offer Five Things Leaders Must Do.

The first, says Kotter, is "help a group establish some sensible direction." The mot du jour for this is vision. But it's not vision in the Mosaic sense: a view from the mountain, with the promised land of milk and honey so clear you can practically see the worker bees pollinating happily away. Says Buffett: "Vision is too fancy, but they have a dream and"--this is the key, subtle part--"the dream isn't fleshed out, which is why they are never satisfied." Welch is on his fourth major campaign at GE--there were "Gotta be No. 1 or No. 2," then "Speed, Simplicity, and Self-Confidence," then "Boundarylessness," now "Six Sigma." Yet according to Buffett, "Jack feels there's more to do at GE than when he started." Welch himself once said, with a tinge of scorn, "Some CEOs think the day they become CEO is the high point of their careers. They ought to feel they're just beginning."

Second, says Kotter, "great leaders are all good at getting relevant partners aligned with, buying into, believing in" the direction they have set. Says Larsen: "You can only push and shove so far. It isn't leadership till you somehow touch people in a way that makes them want to contribute the maximum." True, CEOs like Gates, Grove, and Welch can be conspicuously hard-driving. But, says Kotter--this is another subtle bit--"they may drive people toward results, but they align them with broader ideas of what the company should be and why." They're tireless talkers, whether it's through speeches or confabs or chats or prose. (Buffett, Welch, and Grove are among the best business writers in America.) Says Kotter: "Lew Platt isn't a loud, extroverted guy, but he is constantly clarifying where we're taking this thing, and in his own quiet, blushing way getting his colleagues not only to understand but to agree it's right."

Kotter's third constant of leadership content: "The ability to create conditions that energize and inspire people to get off their fannies." Herb Kelleher is easily the noisiest of this warren of Energizer Bunnies, but there's nothing random about the racket. His every beat of drum and crash of cymbal emphasizes his design for Southwest, which is to make flying cheap, fast, and fun--a formula that works so well that during Southwest's first three months flying from Baltimore to Cleveland, total traffic on the route rose 4,620% above the same period the year before.

"Atmospherics have a disproportionate weight in my mind," he says, appropriately for an airline CEO. "We pay just as good wages and benefits as other airlines, but our costs are lower because our productivity is higher, which is achieved through the dedicated energy of our people. It's sheer willpower--no mechanical tricks." Southwest can empty and refill a plane in 20 minutes; most airlines need an hour. "We've got exactly the same equipment," the CEO says. "The difference is, when a plane pulls into a gate, our people run to meet it. Ponce de Leon was looking for the Fountain of Youth in the wrong place--he should have come to Southwest Airlines."

To these three pieces of the content of leadership, add a fourth, especially for captains of industry: a knack for allocating capital. Everyone knows that's the CEO's job and it's important, but a little math, courtesy of the Old Master of Omaha, helps show how important. Say a company earns a 20% return on equity--as these routinely do--and pays back 5% a year to shareholders, reinvesting 15%. Compound that 15% for five years: The CEO has allocated more equity capital than the company had when he started. Says David Nadler, head of the Delta Consulting Group and a confidant of such leaders as Xerox's Paul Allaire and Lucent's Henry Schacht: "It's not just returns that matter; it's what you do with the returns."

Allocating capital is equal parts discipline and art. Alfred Rappaport, an expert on the discipline, admires the art: "The best CEOs I have seen are extremely good at some 'soft' things. They know how to motivate the system. They ask the right questions about execution. And they have an economic model that makes sense, that they understand, which they use as a navigational tool. They don't have a whole bunch of measures."

The economic model--like the vision--isn't overly detailed. Asks Rappaport: "What good is a wonderful project if it's embedded in a lousy strategy?" Whether the capital investment is in brick and mortar or--as it is increasingly--in ideas, once the strategic allocation is right, the rest gets a lot easier. G.G. Michelson saw that close up at General Electric. She recalls: "Jack's first move was to say every business had to be No. 1 or No. 2 in its industry. When you start with that and lop off the threes and fours, you've already made the most important decisions about how you're going to grow the company."

There's one more item on our list of Things Leaders Must Do, and it's just what your broker says Investors Must Not Do: fall in love. There are CEOs who slash and CEOs who fix and CEOs who safeguard and CEOs who build. The great ones do all these things too, but first of all they love. Passion, commitment, ferocity--the traits of lovers are in these leaders. Says Buffett the investor: "Find the leader who loves his business--who's not measuring himself by whether he got into Augusta or goes to Davos." Says Buffett the CEO: "I could play golf like Tiger Woods, but if Berkshire were not doing well, I'd not be happy." In 17 years, says Michelson, "Never have I seen Jack Welch bored or tired--never. He thinks he's the luckiest man alive." Which goes double ditto for Kelleher: "I love it, I love it--I sure as heck do."

REPORTER ASSOCIATES Ann Harrington and Maura Griffin Solovar