It’s up for debate whether or not it makes sense that the average CEO of a top American company makes 300 times more than their median-level employee, but new research finds that the more aggressive, self-confident, and narcissistic top executives are the ones that make the most money.
In the study “Narcissistic CEOs and executive compensation,” researchers Charles O’Reilly of Stanford University, Bernadette Doerr and Jennifer Chatman of the University of California, Berkley, and David Caldwell of Santa Clara University used employee feedback from 32 of the biggest tech corporations in the U.S. to determine how narcissism affects compensation.
For science’s sake, narcissism is defined as “a sense of personal superiority, grandiosity, dominance, and a desire for power,” all coupled with low empathy and the tendency to become hostile when confronted with criticism.
The companies analysed in the study accounted for two-thirds of the revenue in the industry. Only one of the 32 CEOs in the analysis was female, and the CEOs’ average age was 51.7.
The researchers reached out to over 600 employees of these companies who were alumni of three West Coast business schools and got 250 employees to agree to participate in their study, for an average of about seven employees from each company. They had worked an average of seven years at their respective companies, and 34% of the pool were women.
Participants were presented with eight traits of narcissism (e.g. self-centered, arrogant, conceited) and asked to rate their CEO’s correlation to them on a scale of 1-7 (1 = very inaccurate, 7 = very accurate). They then used the same scale to analyse their CEOs with the Ten-Item Personality Inventory that measures extroversion and introversion.
The research team also acquired letters to shareholders for the year 2009 when available, as well as transcripts of quarterly earnings calls in which the CEO was present. They put these through a text analysis program to count the number of first-person pronouns, on the assumption that a focus on “I” and “me” rather than “we” and “us” implies being self-centered.
When measuring these findings against compensation, controlling for the fact that CEOs of bigger corporations typically make more than those who don’t, the researchers found that there was a significant correlation between CEO compensation and narcissism.
They found that, as a group, narcissistic CEOs with high tenure — meaning they’d been at the company for a while — made an average of $US512 million more than their less-narcissistic peers who spent the same amount of time at their companies. And according to the study, narcissists don’t get their way from the start — high tenure, high narcissists made $US649 million than their lower tenure, narcissistic counterparts, according to the graph to the right.
O’Reilly tells us that low tenure, high narcissism CEOs made less money than low tenure, low narcissism CEOs because, “I suppose you could argue that narcissists, because of their grandiosity, are willing to start lower with the presumption that their brilliance will be recognised over time.”
While the researchers did not count the CEOs’ age as a factor, the possibility also exists that the low tenured narcissists in question became executives earlier in their careers than their low narcissism counterparts, and were thus worth less.
O’Reilly adds that the pay for narcissists increases sharply over time because “the significantly higher compensation for high-tenured narcissists likely reflects their continued interaction with the board — and the fact that narcissists look for signals that justify their brilliance. In this case, they are likely to demand (and get) more pay.”
Most of this money is coming from stock options and grants. High-tenured narcissists have significantly higher share value than high-tenured non-narcissists.
The researchers note that is it possible that over time, a CEO’s narcissism could increase, but they are confident in studies that find true narcissism to be a lifelong trait rather than a developed one.
They also acknowledge the possibility that the more positive trait of charisma, which is linked to narcissism, may be what persuades board members to pay these CEOs so lavishly.
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