Why narcissistic CEOs kill their companies. (2012)

“Narcissistic CEOs can be… amazingly damaging …in some cases, eventually killing their companies

Eric Jackson
11 January 2012, Forbes.com

…Organizational researchers may not believe that executive narcissism is of much theoretical or practical significance. They may see executive narcissism as incidental to organizational functioning – annoying to those who must endure it, grist for jokes about self-absorbed CEOs, but little more.

However, narcissism in the executive suite can be expected to have effects on substantive organizational outcomes, potentially including strategic grandiosity and submissive top management teams. Narcissism can affect an executive’s choices in such areas as strategy, structure, and staffing.

In the first study, (Hambrick and Chatterjee) studied 111 CEOs in the computer and software industries between 1992 and 2004. (They found that:)

– more narcissistic CEOs spent more on advertising … more on R&D… ran up more costs…. and took on more debt

– More narcissistic CEOs also tended to do more acquisitions and pay much higher premiums for the companies they bought

– More narcissistic CEOs led companies that had more extreme performance results; sometimes they’d do well and other times they’d do terribly.

(In a follow-up study they found:)

– Highly narcissistic CEOs are much less responsive to recent objective measures of their performance than less narcissistic CEOs. …Narcissists would continue to make lots of acquisitions at high premiums, even when their company hadn’t been doing well, whereas the less narcissistic CEOs would get more conservative in the face of bad recent results

– Most interesting though, they found that highly narcissistic CEOs were very responsive to social praise (media praise and media awards) and this would spur them on to increase their pace of acquisitions and premiums paid (which, over time, tended to destroy shareholder value). Less narcissistic CEOs were much less responsive to social praise. In other words, that praise didn’t cause them to feel confident enough to go out on a buying spree for companies.

Access the full article here: Why narcissistic CEOs kill their companies