Big egos can mean big profits, with the right CEO in place and harnessed lightly. Big money often has very little to do with humility.
This is a difficult time for board succession and CEO search committees.
Amid increased cultural sensitivity, unflattering personality characteristics are being highlighted, both fairly and unfairly. This can limit the number of candidates accepted during a job search.
The “Unethical CEO Candidate” doesn’t work anymore. The “Bully CEO Candidate” is highly problematic. And the candidate for “Imperial Chief Executive” is out of step with the times.
This must mean that the “Narcissistic Chief Executive” candidate has died upon arrival. Right?
Nope. It’s not true! A study by a respected Stanford University team suggests that a narcissistic CEO can bring unique, attractive, and unexpected benefits to an organization. This provides a valuable lesson in the importance of succession planning and evaluations of CEO performance.
The Stanford Report was designed to assess how CEO personality affects corporate outcomes. These include stock price, strategic decisions, governance quality, and corporate reputation. The survey examined narcissism as a personality type because it’s associated with “larger-than-life personalities.” This character trait is perceived to be highly prevalent among chief executives.
Reports on Narcissistic CEOs
The report’s initial definition of narcissism included a wide range of characteristics. These include the unacceptable, such as an exaggerated sense of self-importance and an over-reliance on admiration and attention. It also included the acceptable, including self-confidence and risk tolerance. The report put a strong focus on goal achievement and congenial personalities and the desirable traits of confidence and dynamism.
However, it’s often difficult to distinguish between self-confident and narcissistic leaders, according to the report.
The report used “validated instruments” to perform its analysis. These measurements (e.g., personality traits and corporate outcomes) were more reliable than those that are based solely on “unobtrusive facts.” Examples include speech patterns, video observations, and observable facts such as the placement and size of the CEO’s photograph within the annual report.
The latter shows that leaders who are narcissistic often have negative effects on their companies.
The report is a compilation of the opinions of directors from both public and private companies about their CEOs. It covers a range of perspectives. The majority of CEOs scored well when evaluated using criteria like extroversion, agreeableness, and conscientiousness. They also score high on emotional stability, openness, emotional stability, and openness.
The results also showed low levels of CEO narcissism. Perhaps the most important measurement was the link between narcissism and corporate results. It found that more egotistical CEOs were associated with lower stock-price performance. Compare that to the 11 percent annualized outperformance for less narcissistic leaders.
Finally, the report revealed that narcissistic CEOs have higher ESG scores than less narcissistic ones.
CEOs in Government
Survey questions that addressed the relationship between narcissism and governance quality produced a similarly surprising result.
The survey results showed that the CEO who is narcissistic was more likely to run companies that follow good governance features. These include protecting the interests of minority shareholders, reduced managerial entrenchment, and majority voting in uncontested director elections. They typically unified board structure with annual electors and offered shareholder rights to call special meetings. A simple majority makes decisions. There was a unified share structure.
The final outcome-based report element shows that the median total salary for narcissistic chief executives was almost one-third more than that of non-narcissistic ones. So…does the Narc CEO or Non-Narc CEO make more money? Results showed no compensation difference. This suggests that compensation benefits do not favor one personality type.
But labels can be misleading, inaccurate, and unfair.
According to the Stanford Report, boards can mischaracterize the strengths and skills of CEOs with narcissistic tendencies. This sounds like a warning for boards to be aware of their critical responsibilities in relation to the CEO’s supervision. Corporate boards should remember that narcissism is not a characteristic of the CEO or candidate.
In reality, narcissism is not the widespread problem some assume. Board members and others control the selection process. The deciding factor should not be whether the chief executive is a narcissist. A board should not judge a CEO’s “book” by his narcissistic cover when reaching its conclusions.