On the destructive nature of narcissist CEOs

Study shows preening egos of many chief executives lead to excessive risk-taking

Over at Forbes, contributor Eric Jackson has a excellent article about "why narcissistic CEOs kill their companies."

The topic of narcissism always has fascinated me (along with anything regarding the narcissists' more vile egocentric cousins, sociopaths and psychopaths). All three can be found in abundance in our society, but especially in areas where power can be wielded and people abused -- law enforcement, coaching, politics and the corporate corner office, among others.

Nearly all of us know one or more narcissists. These are people who think and behave as if they're the smartest person in the room, who constantly solicit and demand praise and admiration, who have volatile tempers (especially in reaction to perceived criticism), who harbor eternal grudges, who believe others are envious of them, who talk only about themselves and their accomplishments, who take credit for other people's ideas, who never accept responsibility or blame, who are dismissive of other people's problems, etc. For narcissists, it's me me me me me, 24/7.

(The classic joke about narcissists involves a conversation in which the narcissist prattles on and on about his or her self, concluding with, "But enough about me. What do you think about me?" Of course, what you are supposed to think is that the narcissist is the greatest person in the history of the planet.)

Jackson's Forbes piece focuses on research done by Don Hambrick, a professor at the Smeal College of Business at Penn State. Hambrick and co-author Arijit Chatterjee sought to identify narcissistic chief executives and then assess their actions and decisions and their impact on the companies they run.

Of course, no one ever admits to being a narcissist, so the researchers came up with a CEO narcissist index comprising four elements: How big the CEO's photo is in the company's annual report; how frequently the CEO's name is mentioned in company press releases; the chief executives use of first-person singular pronouns when publicly addressing shareholders; and (perhaps most significantly, to me at least), the gap between the CEO's compensation package and that of the company's less-deserving No. 2 executive.

(I don't read corporate press releases much any more, but when I did, I was struck by how many began with, "[Company] Chief Executive and President [Ned Narcissist] has announced..." That's either a narcissist or a boot-licking PR person.)

Among the findings of a study done by Hambrick and Chatterjee several years ago are that narcissist CEOs:

-- Spend more on advertising and research and development as a percentage of sales, and also run up more debt.

-- Conduct more acquisitions and pay higher premiums for the companies they buy.

-- Tend to generate wild fluctuations in company performance (quite reflective of the narcissist's wild fluctuations in mood).

The two researchers' latest study (abstract here), Jackson reports, shows that:

Highly narcissistic CEOs are much less responsive to recent objective measures of their performance than less narcissistic CEOs. They found the narcissists would continue to make lots of acquisitions at high premiums, even when their company hadn’t been doing well.

Well, sure, but that's because all you idiots and simpletons can't grasp my long-term master strategy!

And this:

Most interesting though, they found that highly narcissistic CEOs were very responsive to social praise (measured as 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.

The problem, obviously, is that narcissists eventually drift from reality. Easy to do when you set up a self-reinforcing loop of obsequious flattery within your enterprise and cherry-pick external praise from the media.

However, sometimes the rest of their industry and the larger market don't fall as easily under the spell of the brilliant narcissist. And it's at this crossroads of cognitive dissonance where many a company crash and burn.

But don't blame the narcissist. You try being the smartest person in the room, surround by a bunch of fools. It's undoubtedly hell.

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