Put Your Ego to Work

Should you pick stocks based on how many photos of the C.E.O. are in the company's annual report? The results of a new study might make you consider it.

Companies led by narcissistic chief execs tend to make more frequent strategy changes, undertake larger acquisitions, and experience extreme performance swings, according researchers at Penn State's Smeal College of Business.

"Highly narcissistic C.E.O.s...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," write Arijit Chatterjee, graduate lecturer, and Donald Hambrick, Smeal Chaired Professor of Management at Penn State.

The researchers determined the narcissism of 111 C.E.O.s of computer software and hardware companies by the following: the prominence of their photographs in annual reports, the frequency of the their names in company news releases, how much the C.E.O.s talked about themselves in interviews, and how each chief's compensation compared to that of the second in command.

They then ranked the level of narcissism and compared it against the strategies and performance of their companies. It turns out that the companies with the most strategic changes, acquisitions, and performance fluctuations also had the most full-of-themselves chief execs.

But don't start selling off your stock in Oracle and Viacom just yet. While companies led by egotistical execs might experience higher highs and lowers lows, overall strength of performance didn't seem to correlate to narcissism.

"Although narcissists tend to generate more extreme and irregular performance than non-narcissists, they do not generate systematically a better or worse performance," said Arijit and Hambrick.

by Liz Gunnison