Narcissism is a common characteristic found among CEOs in today’s business world. The frequent use of “I” and the first person tense, as well as possessing the desire to change the world are tell-tale signs that a CEO is a narcissist. Over the past several years, a number of tests and studies have been conducted to test the hypothesis that there is in fact a correlation between narcissism and CEOs.
A study by the University of Erlangen-Nuremberg in Germany analyzed the function of CEO narcissism based on the leaders' prominence in annual reports. The research findings suggest that narcissistic CEOs tend to take bolder action when they are aware that they have an audience that is likely to view their actions as being daring. More general studies have been done such as a test that was designed by two Penn State University professors to determine whether or not a CEO is a narcissist, and if so to what degree. Other research surfaced questioning whether small details such as the size of a CEO’s signature or the size of their profile photos in annual reports indicate levels of narcissism.
Today, many believe that some degree of narcissism is required of those leading a company, but when is enough enough? Narcissistic CEOs can be seen as inspirational, produce results in challenging situations and come up with creative solutions but when and how can narcissism morph into the downfall of a CEO or even the company? Certainly a puzzling rhetorical question to pose, let’s take a stab at it. Many overly narcissistic CEOs tend to make acquisitions as high premiums, regardless of their company’s performance. Whereas studies show that less narcissistic CEOs typically make decisions that are more rational and in line with how their company is performing. Most interesting though, studies found highly narcissistic CEOs to be very responsive to social praise, which then led them to increase the pace of their acquisitions and premiums paid. Over time, naturally this trend tended to destroy shareholder value. On the flipside, far weaker a correlation was found between social praise and bold risky decisions for less narcissistic CEOs. In addition to affecting most business operations, narcissistic tendencies seem to influence how compensation is allocated as well. It has been found that CEOs who have been with their firm longer receive more total direct compensation (salary, bonus, stock options, etc.). Also, there is a much larger gap between a narcissistic CEO’s salary and the second highest paid executive’s salary than there is with a non narcissistic CEO.
