New study measures narcissistic CEOs' effect on corporate strategy, performance

Jul 18, 2007

Companies led by more narcissistic chief executives tend to make more frequent strategy changes, undertake larger and more frequent acquisitions, and have more extreme and irregular fluctuations in performance, according to new research from Penn State's Smeal College of Business.

Arijit Chatterjee, graduate lecturer, and Donald Hambrick, Smeal chaired professor of management, gauged the level of narcissism exhibited by 111 CEOs of computer software and hardware companies and compared it to the subsequent strategies and performance of their companies.

"Highly narcissistic CEOs -- defined as those who have very inflated self-views, and who are preoccupied with having those self-views continuously reinforced -- can be expected to engage in behaviors and make decisions that have major consequences not only for the individuals who interact directly with them, but also for broader sets of stakeholders," the researchers wrote.

They used five indicators to measure CEO narcissism: the prominence of the CEO's photograph in the company's annual report, the frequency of the CEO's name appearing in company news releases, the use of first person singular pronouns (I, me, mine, my and myself) by the CEO in interviews, and the CEO's cash and non-cash pay compared to the company's second-highest executive.

Using these measurements, Chatterjee and Hambrick developed an index, ranking the CEOs according to their levels of narcissism.

They then compared the CEOs' narcissism levels to their companies' strategic dynamism, acquisitions, and performance extremeness and fluctuation. Their results show that CEO narcissism is related to all four measures.

The data show that narcissistic CEOs tend to lead companies through more changes in strategic resource allocation and their companies experience higher highs and lower lows in organizational performance.

"While less narcissistic CEOs may be inclined to pursue incrementalist strategies that entail refining and elaborating on the status quo, more narcissistic CEOs gravitate to bold and highly visible choices," they wrote. "Thus, narcissism may be thought of as an ingredient that stimulates distinctive, extreme managerial actions."

Their research indicates no relation between executive narcissism and how well a company performs. "Although narcissists tend to generate more extreme and irregular performance than non-narcissists, they do not generate systematically a better or worse performance," they found.

"It's All About Me: Narcissistic CEOs and Their Effects on Company Strategy and Performance" is forthcoming in Administrative Science Quarterly.

Source: Penn State

Explore further: Dragons awaken and Clarkson goes green in April Fools' medley

Related Stories

Narcissistic CEOs and financial performance

Jul 24, 2014

Narcissism, considered by some as the "dark side of the executive personality," may actually be a good thing when it comes to certain financial measures, with companies led by narcissistic CEOs outperforming those helmed ...

Expanding drug treatment: Is US ready to step up?

Nov 08, 2009

(AP) -- Based on the rhetoric, America's war on drugs seems poised to shift into a more enlightened phase where treatment of addicts gains favor over imprisonment of low-level offenders. Questions abound, ...

Recommended for you

The humorous path to academic success

17 hours ago

Academics and universities are in a race: to produce high impact publications, to gain citations, bring in grant income and climb university rankings. In this rat race, perhaps the true path to academic success ...

Scientists ask, peer review on fast track at what price?

18 hours ago

A fast-track peer-review trial is in the news. A Nature Publishing Group (NPG) -owned journal's editorial board member has resigned in protest over a pilot project where researchers pay for faster peer review. ...

New research says Anne Frank likely died a month earlier

Mar 31, 2015

Teenage Jewish diarist Anne Frank likely died of typhus in a Nazi concentration camp about a month earlier than previously thought, the Amsterdam museum that honors her memory said Tuesday on the 70th anniversary of the officially ...

User comments : 1

Adjust slider to filter visible comments by rank

Display comments: newest first

RkeyTeq
not rated yet Aug 09, 2009
Higher highs and lower lows. So that means that investing in companies with narcissistic CEOs is better for speculative investing (ride the wave in a good cycle and short the company's stock in a recession), while long-term solid investing (pension, etc.) should be placed in companies with less egocentric bosses.

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.