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Narcissism, director selection, and risk-taking spending. (2015)

“… when narcissistic chief executives interact with the board, they often meet not a moment of reckoning but their favourite thing: a mirror.

David. H. Zhu, Arizona State University; Guoli Chen, INSEAD, Singapore.
Strategic Management Journal, 36: 2075–2098.

Much recent corporate governance research has considered the failure of boards to anticipate and prevent the risk-taking decisions that brought on the 2008 crisis.

The slow pace of demographic change on boards is often identified as part of that problem.

This paper points to an area that is less discussed: how personality types affect board-chief executive interactions and ensuing company behaviours. Demographic diversity remains an important consideration, but overlooking how personality fits in could result in differences on the board being merely skin-deep.

Figuring out personality is no simple task, but research shows that people can identify a narcissist by watching his or her interactions with others. Narcissists may be especially adept at spotting their own kind

Seeking a friendly reception for their future decisions, chief executives will try their best to choose directors similar to themselves – not just in terms of the oft-cited demographic characteristics (eg. race, class background, gender) but also personality type

A narcissistic consensus on the board is a potential problem because of the tendency of narcissists to engage in risk-taking behaviour. Because directors have become increasingly involved in strategic decisions in recent years, new directors can significantly influence the chief executive’s risk-taking decisions.

From the review ‘Narcissistic leaders, mirrors in the boardroom and firms’ risk-taking behaviour’, published in the South China Morning Business Post.

Access the full academic paper here: Narcissism, director selection, and risk-taking spending

Access the newspaper review here.

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