The perks of narcissism: Behaving like a star speeds up career advancement to the CEO position

It is widely acknowledged that narcissism is a peculiar characteristic of leaders, such as CEOs. However, the role of narcissism in CEO emergence and appointment has not been studied yet. We overcome this gap by studying whether having a highly narcissistic personality allows individuals to become CEOs sooner. We posit that these individuals have quicker career development, climbing the hierarchical chain faster. We also hypothesize that this relation may be moderated by the firm's characteristics, comparing family and nonfamily firms. Family firms are the most widespread organizational form of firms around the world, and their peculiarities might affect the appointment of narcissistic CEOs. Estimates on a sample of 172 individuals partially confirm the hypotheses. Highly narcissistic individuals become CEOs quicker, regardless of whether the firm is a family business or not. Narcissistic individuals thus benefit from their personality when aiming at becoming CEOs faster in their career advancement.     

Older and Wiser: How CEOs’ Time Perspective Influences Long‐Term Investments in Environmentally Responsible Technologies

Most theories of corporate governance argue that chief executive officers (CEOs) take less risk as they near the end of their career, and therefore are less likely to make major investments. This prediction is based on decisions related to firm‐specific benefits; however, it may not be generalizable to decisions that involve broad societal goals. In terms of societal investments, CEOs with a longer time perspective may be more likely, rather than less likely, to invest. In this paper, we argue that a CEO's future time perspective is fostered by shorter career horizons, longer tenures, higher organizational ownership and less short‐term compensation. We test these hypotheses on 150 observations from the US investor‐owned electric power generation sector over a three‐year unbalanced sample (64.3% of the population). We applied random‐effects generalized least squares (GLS) estimations to test our hypotheses, and found support for three out of four hypothesized relationships.     

“See You in Court”: How CEO narcissism increases firms' vulnerability to lawsuits

Although some researchers have suggested that narcissistic CEOs may have a positive influence on organizational performance (e.g., Maccoby, 2007; Patel & Cooper, 2014), a growing body of evidence suggests that organizations led by narcissistic CEOs experience considerable downsides, including evidence of increased risk taking, overpaying for acquisitions, manipulating accounting data, and even fraud. In the current study we show that narcissistic CEO's subject their organizations to undue legal risk because they are overconfident about their ability to win and less sensitive to the costs to their organizations of such litigation. Using a sample of 32 firms, we find that those led by narcissistic CEOs are more likely to be involved in litigation and that these lawsuits are more protracted. In two follow-up experimental studies, we examine the mechanism underlying the relationship between narcissism and lawsuits and find that narcissists are less sensitive to objective assessments of risk when making decisions about whether to settle a lawsuit and less willing to take advice from experts. We discuss the implications of our research for advancing theories of narcissism and CEO influence on organizational performance.     

Hedging and accounting-based RPE contracts for powerful CEOs

Several firms prohibit their CEOs from trading in the stock of peer firms. This is puzzling since hedging by the CEO through private trading in the capital market can reduce the CEO’s exposure to systematic compensation risk. When the CEO’s incentive contract comprises relative performance evaluation, we find that the firm might want to disallow private hedging even though there are no technological interdependencies or strategic interactions to peer firms. In the analysis, we highlight two frequently observed characteristics of incentive contracts. First, the use of accounting benchmarks is widespread in compensation contracts for CEOs. Second, empirical and anecdotal evidence suggests that powerful CEOs have influence on the process of designing their own compensation. We find that in the presence of a powerful CEO, the firm can benefit from disallowing private hedging. In particular, the firm’s decision to allow or to disallow private hedging depends on the characteristics of the accounting benchmarks and the characteristics of the peer firms.     

CEO humility,narcissism and firm innovation: A paradox perspective on CEO traits

We examine how two seemingly contradictory yet potentially complementary CEO traits—humility and narcissism—interact to affect firm innovation. We adopt a paradox perspective and propose that individuals can have paradoxical traits and that, in particular, humility and narcissism can coexist harmoniously, especially among the Chinese, whose philosophical tradition embraces paradoxical thinking and behaving. CEOs that are both humble and narcissistic are hypothesized to be more likely to have socialized charisma, to cultivate an innovative culture, and to deliver innovative performance. Two studies using multisource data involving 63 CEOs, 328 top managers, and 645 middle managers in Study 1 and 143 CEOs and 190 top managers in Study 2 support the hypotheses and point to new directions for studying CEO traits and their effects on firm outcomes.     

Human capital and agency effects on CEO compensation of IPO biopharmaceutical firms and the market’s response

This paper examines the determinants of base pay and total incentive compensation packages of CEOs of biopharmaceutical firms that have recently gone public, and whether human capital and agency factors affect the market’s response to the initial public offering. We find that in terms of net proceeds, the IPO market appears to reward the firms that have founder-CEOs and CEOs with higher incentive compensation. CEOs with prior venture capital experience are associated with receiving higher incentive compensation, while CEOs with a greater ownership interest in the firm receive lower incentive compensation but higher salaries. CEOs of firms with a greater percentage of insiders are associated with lower salaries. The results should add to our understanding related to human capital and agency theories, as well as help firms and investors better understand and structure CEO compensation.     

CEO successor compensation: outside versus inside successions

We propose that outside CEO candidates will have greater bargaining power than insiders. As a result, outside CEO successors will likely receive greater total compensation than inside CEO successors. Outside successors, meantime, pose more risk to the hiring firm than inside successors due to higher information asymmetry. As a result, outside successor compensation packages are tilted towards more performance-related pay-at-risk, while inside successor packages have a higher percentage in salary. In addition, outside successors may want to utilize the structure of their compensation at their previous firm in their new contracts. Using a sample of 99 firms with outside successors who were not CEO in their prior firms, matched by industry and size to firms that hired inside candidates, we find evidence supporting these hypotheses.     

The impact of family CEO’s ownership and the moderating effect of the second largest owner in private family firms

This study explores two ownership issues in private family firms. First, we investigate the relationship between the ownership of family CEOs and firm performance, and postulate that this relationship in private family firms is more complex than the inverted “U” relationship found in public family firms. Second, we predict a potential moderating effect of the second largest owner, who may exert a monitoring role on family CEOs. We focus on private family firms as recent studies show that private family firms have distinct features compared to public family firms, and that findings documented in public family firms may not apply to the ubiquitous, but much less studied, private family firms. We have applied agency theory to develop the two hypotheses, used secondary data on a large sample of private family firms, utilized an adjusted conventional quadratic technique to test the hypotheses, and validated the findings using a second method of piecewise linear specification. The results show that the non-linear relationship between the ownership of family CEOs and firm performance is more complicated than the often-documented inverted “U” shape from public firms. Meanwhile, the second largest owner with a high enough ownership stake can impose a positive moderating effect by mitigating potential agency problems caused by family CEOs.     

Do Compensation Consultants Drive Up CEO Pay? Evidence from UK Public Firms

Do compensation consultants drive up CEO pay for the benefit of managers, or do they design pay packages to benefit firm owners? Using a large sample of UK firms from the FTSE All‐Share Index over the 2003–2011 period, we show a positive correlation between the presence of compensation consultants and CEO pay. Importantly, isolating this effect is somewhat dependent on the endogenous selection of consultants and the statistical modelling strategy deployed. We find evidence that compensation consultants improve CEO compensation design when their expertise is of greater importance (e.g. during the post‐financial crisis period, or for firms that have particularly weak compensation policies). In addition, our findings show that compensation consultants increase CEO pay–performance sensitivity. The balance of evidence supports optimal contracting theory more than managerial power theory, but the authors caution the limits to this verification. We are careful to note that the more compelling evidence for the positive effect of pay consultants on CEOs is based on advanced methods (such as propensity score matching and difference‐in‐differences), and that more standard approaches (such as OLS and fixed effects) are unlikely to reveal the same level of causality of consultants on CEO pay.     

Birds of a feather?: Firm sales growth and narcissism in the upper echelons at the CEO-TMT interface

Blending conceptual framing from the CEO-TMT interface literature with upper echelons decision-making theory, we develop a model of the role of CEO narcissism and narcissism in the upper echelons. We argue that narcissistic CEOs tend to have higher narcissism in their Top Management Teams (N-TMTs). In turn, TMTs characterized by narcissism can benefit from positive aspects of narcissism while avoiding its pitfalls; especially when strategic decision speed is slower and behavioral integration is higher. In a field study of 104 TMTs from publicly-listed South Korean firms, we find an association between narcissistic CEOs and N-TMT, and that N-TMT mediates in the indirect, conditional relationship between CEO narcissism and sales growth. We also invoke threshold theory in anticipation that outcomes associated with N-TMT may be nonlinear. In support of our threshold hypothesis, we find a curvilinear relationship between N-TMT and sales growth; and this curvilinear relationship is stronger for a small number of TMTs scoring high on N-TMT (> +2SD), where TMTs’ activities are defined by deliberative integration. The pattern of results we report provides evidence for the importance of accounting for narcissism in the upper echelons as a predictor of sales growth, and key contextual moderators of this relationship.     

Monitoring the monitor: Enabling strategic change when the former CEO stays on the board

Firms often retain their former CEOs on the board after succession to benefit from the former CEOs’ firm-specific expertise. However, their presence can inhibit successor CEOs from implementing meaningful strategic change, as the former CEOs seek to preserve their personal legacy and may see the strategic landscape differently, especially when the successor CEO is hired from outside the firm. Using a strategic leadership interface perspective, we propose that board members can alleviate this potential tension and enable strategic change. To test our theory, we focus on a subsample of succession events: when the former CEO stays on board as chair and the successor CEO is an outsider. This scenario is likely to result in strategic tension and cognitive differences between these two organizational leaders. We find that in such situations, boards with a higher proportion of outside directors experience greater post-succession strategic change; we find no effect in other succession scenarios. We isolate legacy conservation as a motivating factor by showing that the effect manifests for divestitures but not for acquisitions.     

Gaining the ultimate power edge: Women in the dual role of CEO and Chair

Using archival data, the authors explored whether female CEOs possess as much structural power as male CEOs and what demographic characteristics are essential for female CEOs to have in order to increase their structural power in their firms. The authors use status characteristics and human capital theories to develop hypotheses. Findings show that female CEOs do not possess as much structural power as male CEOs as proxied by attaining a dual CEO/Chair role in the firm. Instead of dual CEO and Chair roles, female CEOs are more likely to be given the less powerful role of CEO and President. Moreover, female CEOs are more likely to gain structural power if they are entrepreneurs, work in large companies, or possess an elite education.     

CEOs’ temporal focus,firm strategic change,and performance: Insights from a paradox perspective

Recent research indicates that CEOs’ temporal focus (the degree to which individuals attend to the past, present, and future) is a critical predictor for strategic outcomes. Building on paradox theory and the attention-based view, we examine the implications of CEOs’ past and future focus for strategic change. Results from polynomial regression analysis reveal that CEOs who cognitively embrace both the past and the future at the same time engage more in strategic change. In addition, our results reveal that the positive strategic change−firm performance relationship is enhanced when CEOs’ past focus is high, whereas CEOs’ future focus mitigates the translation of strategic change into firm performance (when their past focus is low at the same time). In addition, supplemental analyses indicate that the impact of CEOs’ temporal focus turns out differently in stable and dynamic environments. Our study thus extends the literature on both individual’s temporal focus and strategic change.     

Does owner CEO narcissism promote exporting SMEs' market spreading strategy? Joint effects of asset-specific investments and firm exporting experience

This study explores the influence of owner chief executive officer (CEO) narcissism on the market spreading strategy of exporting small-to-medium enterprises (SMEs). Combining insights from the literature on CEO narcissism and trait activation theory, it is argued that SMEs with narcissistic owner CEOs are more likely to prefer a market spreading strategy, depending on firm-level asset-specific investments and exporting experience. The empirical analysis of a sample of 248 exporting SMEs in China supports the theoretical prediction that owner CEO narcissism has a positive impact on the preference toward a market spreading strategy. In addition, the results show that asset-specific investments weaken the positive influence of owner CEO narcissism on the preference of a market spreading strategy, but this negative moderating effect becomes less significant as SMEs gain more exporting experience. This paper contributes to the emerging research on the role of owner CEO narcissism in firm internationalization decisions, offering a more complete understanding of the extent to which owner CEO narcissism can influence exporting SMEs' tendency toward market spreading, and delineating how such influence may be dependent on organizational-level situational factors.     

董事激励与公司业绩--实验的证据

我们在实验框架下检验了董事会成员的激励对股东财富和CEO报酬的影响,以及该报酬与公司业绩之间的敏感度.文中提出了两种任命董事的方法,一种由CEO任命,另一种由最大的股东自动担任董事.由董事会决定CEO的报酬,而CEO负责企业的生产、投资和分红决策.投资者根据接收到的每个公司的分红、资本收益这些信息,通过买卖这些企业的股票来调整他们的资产组合. 我们发现,薪酬与业绩之间的敏感度随董事持股比例的增加而上升.此外,当大股东作为董事会成员时,经济体所产生的财富(股东财富是其中的一部分)更大;而当CEO选择董事时,结果是缺乏效率的.本文讨论了关于董事职能和相关代理成本这一研究结果,以及标准会计框架下,限制执行人员报酬和报表标准化要求.     

Countermove: how CEOs respond to post-acquisition compensation adjustments

Following poorly performing acquisitions, the board of directors often redesigns the CEO’s annual compensation package to include less risk-encouraging stock options and more risk-discouraging restricted stock. This study explores the emerging area of post-acquisition compensation management and proposes that CEOs can indirectly, but effectively, defend against compensation rebalancing. Specifically, we find that CEOs may counteract the effects of compensation rebalancing by delaying the exercise of existing stock option holdings. Fortunately, this insight also offers valuable implications including the ability of the board to limit the CEO’s defense by adjusting stock option exercise windows.     

SOCIAL NETWORKS IN THE BOARDROOM

This paper provides evidence that social networks strongly affect board composition and are detrimental to corporate governance. Our empirical investigation relies on a large data set of executives and outside directors of French public firms. This data source is a matched employer–employee data set that provides detailed information on directors/CEOs as well as information about the firm employing them. We find a strong and robust correlation between the CEO's network and that of his directors. Networks of former high‐ranking civil servants are the most active in shaping board composition. Our identification strategy takes into account not only firm and directors’ fixed effects but also the matching of firms and director in terms of one observable and one unobservable characteristic. Turning to the direct effects of such network activity, we find that firms in which these networks are most active pay their CEOs more, are less likely to replace a CEO who underperforms, and engage in less value‐creating acquisitions. These findings suggest that social networks are active in the boardroom and have detrimental effects on firms’ governance.     

CEO grandiose narcissism and firm performance: The role of organizational identification

This study reconciles the positive and negative sides of CEO grandiose narcissism by examining the role that CEO organizational identification plays in moderating the effect of CEO grandiose narcissism on top management team (TMT) behavioral integration. We first distinguish between grandiose and vulnerable narcissism and we then draw on upper echelons theory and executive personality research to hypothesize and test a model in which CEO grandiose narcissism is positively related to TMT behavioral integration when CEOs are high in organizational identification. The relationship is expected to be negative when CEOs do not identify strongly with their organizations. TMT behavioral integration, in turn, predicts subsequent firm performance. Findings based on multi-source data from a sample of 97 CEOs and their firms supported the hypotheses. These results highlight the complex nature of CEO grandiose narcissism – namely, that the construct has both positive and negative aspects as it relates to top management team dynamics and firm performance and that the relationship is affected by CEOs' identification with their organizations.     

Do CEOs exercise managerial discretion to save their jobs?

Chief Executive Officers (CEOs) wield considerable power and authority. In many industries and contexts, CEO turnover is studied in terms of antecedents, the event itself, and the related consequences. However, the extent to which CEOs exert their power and attempt to prevent their dismissal has not been thoroughly examined. In this study, we examine the role of CEOs exercising managerial discretion in their effort to prevent their own corporate demise. We hypothesize that CEOs cut discretionary expenses such as research and development, advertising, and rent in order to boost earnings and enhance financial performance. A sample of CEO turnover from Standard and Poor’s ExecComp database for the period 1992–1998 in US firms yielded 474 turnover firms and 2,066 control firm-years. We tested the effects of CEO turnover and managerial discretion on firm performance measured by cumulative abnormal stock returns. We also compared the turnover and non-turnover firms in terms of pattern of discretionary spending prior to CEO turnover. The results are consistent with our prediction that CEOs facing termination attempt to post higher earnings by reducing discretionary spending after controlling for firm performance, firm diversification, book to market ratio, and CEO ownership, industry-, and year dummies.     

Undermining incentives: CEO reactions to compensation rebalancing

Directors commonly “punish” CEOs for overly risky behavior by rebalancing their compensation to include more restricted stock and fewer stock options. This paper extends the behavioral-agency model to describe how CEOs will manage their holdings of stock and stock options in response to this form of compensation rebalancing. In doing so, it finds that CEOs respond by selling existing stock holdings and accumulating option holdings. This behavior achieves the opposite incentive structure that such rebalancing intends to create, raising questions about the effectiveness of compensation rebalancing in reducing risky decision making.