While narcissist CEOs can use their charisma and risk-taking tendencies to lead a company to great financial success and innovation, narcissism among top management is often a double-edge sword.
Companies led by narcissistic CEOs reported higher earnings-per-share and share price than companies with non-narcissistic CEOs, according to a study, “CEO narcissism and accounting: a picture of profits,” recently published in the Journal of Management Accounting Research, according to Phys.org, a science and technology news service.
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“On one hand, there may be something about individuals with narcissistic personality tendencies that helps them excel in executive leadership positions,” wrote Kari Joseph Olsen from the University of Southern California, in a 2011 version of the research paper, which studied narcissistic CEOs at Fortune 500 companies.
While their personality traits help them, and by extension their companies, perform better, the methods used to achieve higher financial results are sometimes questionable and can jeopardize the long-term health of the organization, even leading to accounting manipulation and fraud.
“On the other hand, the positive relationship between CEO narcissism and earnings-per-share may be explained by negative accounting reporting behaviors,” Olsen added, concluding that personality characteristics such as narcissism may impact accounting-related policies and decisions.
Here are other behaviors of narcissistic CEOs and how they can affect their companies:
They make more money. CEO narcissism is significantly correlated with CEO total compensation, the gap in compensation between the CEO and the senior team and the total value of the CEO’s share holdings, according to a study on “Narcissistic CEOs and executive compensation.”
They have a hard time retaining talents. Employees who identified their managers and CEOs as humble reported feeling more engaged and less likely to leave a company, suggesting that while narcissistic CEOs may be good at attracting talents, it might be harder for them to retain these employees, according to a study on “Humility in Organizations: Implications for Performance, Teams, and Leadership.”
They pay more for acquisitions. Narcissistic CEOs are highly responsive to social praise, both in the forms of media praise and awards, a study on “Executive personality, capability cues and risk taking: how narcissistic CEOs react to their successes and stumbles” found. This search for media exposure increases risk taking, which can translate into more frequent acquisitions and higher premiums paid for these acquisitions, and ultimately damage shareholder value.
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