Research Reveals Upside of CEO Narcissism

LAUSANNE, Switzerland, November 17, 2011 -

A new study shows self-centered CEOs who “crave acclaim and applause” are more likely to keep their companies at the forefront of technological innovation. Additionally, the desire for attention from self-absorbed CEOs fuels the willingness to make daring decisions that less confident counterparts might shy away from, especially during a period of radical change.

Conducted by professors at IMD, a top-ranked business school in Switzerland, Pennsylvania State and Erlangen-Nuremberg Universities, the study’s findings indicate that narcissism in the boardroom helps overcome the inertia that often prevails in large, established organizations.

“We have uncovered the ‘bright side’ of narcissism. It can serve as a catalyst for risk-taking and innovation. Self-important CEOs demonstrate an ability to act on their supreme confidence when others are timid,” said IMD Professor Albrecht Enders. “Narcissists might be annoying and even downright selfish, but they may be the best bet when bold and unconventional actions are needed to save an organization.”

The study won the Academy of Management’s 2011 Glueck Best Paper Award, which recognizes the top 1% of research submissions to the Academy’s Business Policy and Strategy division.

The study examined how 78 CEOs at 33 major US pharmaceutical firms reacted to the emergence of biotechnology from 1980 to 2008. The intensity and speed of undertaking strategic initiatives in biotechnology (alliances, acquisitions, launch of R&D projects) were calculated during each year of a CEO’s tenure.

To calculate CEO narcissism researchers considered four factors:

• Prominence of the CEO’s photo in annual reports
• Number of CEO mentions in press releases
• Cash compensation (salary and bonus) and non-cash compensation (deferred income, stock grants and stock options) relative to the firm’s second-highest-paid executive

Additional conclusions included:

• The more narcissistic the CEO, the more heavily and the earlier a firm invests in new technology - particularly during its emergence
• Firms’ responses to radical change can be traced to not just environmental and organizational factors but to executives’ attributes
• Narcissistic CEOs do not guarantee success. Their daring and risk-taking tend to lead to extreme outcomes - some beneficial, some catastrophic

“Narcissists see the potential for acclaim where others see excessive risk, but it’s by no means always the case that in the end they get to hear the applause they crave,” IMD’s Enders said. “It’s as easy to picture narcissist CEOs who aggressively invest in new technologies that don’t pan out so well.”

About IMD

Based in Switzerland, IMD is consistently top-ranked among business schools worldwide. With more than 60 years’ experience, IMD takes a real world, real learning approach to executive education. (www.imd.org).

Albrecht Enders is a Professor of Strategy and Innovation at IMD. He co-authored this study with Wolfgang-Christian Gerstner (University of Erlangen-Nuremberg), Andreas König (IMD) and Donald Hambrick (Smeal College of Business, Pennsylvania State University).

Contact:

Matthew Mortellaro
IMD Communications
Tel: +41-21-618-0352
matthew.mortellaro@imd.org
www.imd.org

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