Study Measures Narcissistic CEOs' Effect On Corporate Strategy, Performance
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.
Study Measures Narcissistic CEOs' Effect On Corporate Strategy, Performance
UNIVERSITY PARK, PA (July 10, 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 write.
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.
Ultimately, 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 write. "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 find.
"It's All About Me: Narcissistic CEOs and Their Effects on Company Strategy and Performance" is forthcoming in Administrative Science Quarterly.
REPORTERS & EDITORS: For more information, please contact Wyatt DuBois in the Smeal College of Business Media Relations Office at 814-863-3798 or wed112@psu.edu.
Penn State's Smeal College of Business offers highly ranked undergraduate, MBA, executive MBA, Ph.D., and executive education opportunities to more than 5,500 students at all levels. Featuring academic departments of accounting, finance, marketing, insurance and real estate, management, and supply chain and information systems, the college is also home to major research centers such as the Center for Supply Chain Research, the Institute for the Study of Business Markets, the Center for Digital Transformation, the Farrell Center for Corporate Innovation and Entrepreneurship, the Center for Global Business Studies, and the Center for the Management of Technological and Organizational Change.
