On the destructive nature of narcissist CEOs

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

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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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