“See You in Court”: How CEO narcissism increases firms’ vulnerability to lawsuits (2017)

“…In spite of the claim that there is both a “bright side” and a “dark side” to narcissistic leadership, overall, there is little evidence that firms with narcissistic CEOs perform better in the long term than do those with less narcissistic leaders, but significant evidence that they can put their organizations at risk.”

Charles A.O’Reilly, Stanford University, United States; Bernadette Doerr, University of California, Berkeley, United States; Jennifer A.Chatman, University of California, Berkeley, United States.

The Leadership Quality (in press, Volume, Issue undefined). 2017

Image: Flickr/howtostartablogonline.net

Abstract:

Although some researchers have suggested that narcissistic CEOs may have a positive influence on organizational performance (e.g., Maccoby, 2007; Patel & Cooper, 2014), a growing body of evidence suggests that organizations led by narcissistic CEOs experience considerable downsides, including evidence of increased risk taking, overpaying for acquisitions, manipulating accounting data, and even fraud. In the current study we show that narcissistic CEO’s subject their organizations to undue legal risk because they are overconfident about their ability to win and less sensitive to the costs to their organizations of such litigation. Using a sample of 32 firms, we find that those led by narcissistic CEOs are more likely to be involved in litigation and that these lawsuits are more protracted. In two follow-up experimental studies, we examine the mechanism underlying the relationship between narcissism and lawsuits and find that narcissists are less sensitive to objective assessments of risk when making decisions about whether to settle a lawsuit and less willing to take advice from experts. We discuss the implications of our research for advancing theories of narcissism and CEO influence on organizational performance.

Read the full paper here: “See You in Court”: How CEO narcissism increases firms’ vulnerability to lawsuits