Extrovert CEOs make way less money. (2016)

“…researchers found “a robust negative association” between extroverted, talkative CEOs and “return on assets and cash flow”.

Drake Baer, nymag.com, science of us
8 Aug 2016

Based on work by assistant professor Ian D. Gow, Harvard Business School; also Steven N. Kaplan; David F. Larcker; Anastasia A. Zakolyukina: for the National Bureau of Economic Research, July 2016

Photo: Stuart McClymont

Harvard researchers took transcripts from 70,000 quarterly-earnings conferences calls to estimate Big Five personality traits for 4,500 CEOs.

Companies helmed by CEOs with high openness to experience spent more on research and development – “after all, R&D is a corporate form of learning.”

Companies led by highly conscientious CEOs had lower growth, perhaps because conscientious people are dutiful and respect convention, making them effective in government or military, but less so in innovation-oriented private companies.

The researchers found “a robust negative association” between extroverted, talkative CEOs and “return on assets and cash flow” for the firm.

Contributing factors considered include the possibility that “extroverts enjoy dominating others, which depends on their obedience and submissiveness (not a great look in business). Even worse, the short-lived enthusiasm of extreme extroverts can result in aggressive strategies that tend to be prematurely terminated.

“This leads to a fascinating tension: while extroverts have a tendency to rise to the top of social groups, it may not be a great personality trait for running a company.”

Access the full article here: Extrovert CEOs make way less money.

Access the academics working paper here: CEO Personality and Firm Policies