As Anne Mulcahy, CEO of Xerox, walked to the mezzanine balcony overlooking the trading floor of the New York Stock Exchange to ring the closing bell one day in late July, a well wisher asked her what she thought of the occasion of her inauguration as 2008 Chief Executive of the Year.

“It’s great to be honored here, she beamed, but not only that, our stock closed up 3 percent today!”

“Maybe you ought to drop by here more often,” came the reply.

Some 180 guests, CEOs and their spouses, along with NYSE Euronext CEO Duncan Neiderauer and Xerox executives, turned out to celebrate Mulcahy’s triumph, the first time a woman CEO was selected by peers to receive the honor since its inception in 1986.

The event was the 23rd celebration of business excellence in business leadership by Chief Executive magazine. CE solicits nominations from CEOs and their peers through electronic surveys and ballots and culls the list for the 10 most frequently cited people, who become the finalists. Names and dossiers of the finalists are submitted to a selection committee of peers who determine the winner.

“This underscores the special nature of the award,” said Ed Kopko, CEO of Chief Executive and CEO of Butler International. “Although it organizes the process, CE exercises no vote in order to ensure that it is thoroughly peer-reviewed and peer selected,” he said.

Last year’s honoree, Target CEO Bob Ulrich, 2007 Chief Executive of the Year, delivered the accolade on behalf of the judges. As it happens, Ulrich had more exposure to the incoming CEO of the Year than most, owing to the fact that he had asked Mulcahy to join Target’s board some two years before then-Xerox chairman Paul Allaire called her into his office one day in 2001 to tell her that she had the top job if she wanted it. In his tribute during the celebratory dinner at the exchange, Ulrich singled out her courage in sticking to her turnaround plan. “She had the guts to stick with her commitment to invest in R&D when it seemed everyone on the outside was calling for her to sacrifice it to save the company,” Ulrich noted. “It turned out she and her team knew better.”

The recognition of Mulcahy was for much more than the turnaround, as critical as it was. The judges were impressed that she and her team transformed the company’s basic business in fundamental ways. Gone are the standalone copiers. Graphics communications, digital imaging, new productivity services, and new hardware and software technologies represent the company’s new offerings and sources of revenue.

In accepting the award, Mulcahy noted the shift in services, but emphasized that none of the transformation would have been possible without the dedication of the team that stuck it out, particularly through the dark moments. She also pointed to her experience on Target’s board as being particularly helpful in giving her a CEO perspective on strategic issues before she become Xerox’s CEO.

But in the end, Mulcahy threw her biggest bouquet of thanks “to the three men in my life who stood by me during everything,” a reference to her husband Joe, who retired from Xerox many years earlier, and her sons Kevin and Michael, all of whom were present and beaming with pride as she accepted the award from Bob Ulrich and Ed Kopko.