Monday, July 30, 2018

Which CEO is Scarier: The Narcissist Liberal or the Extravert Conservative?

CEOs are consequential people. They have a central role in organizing the firm, choosing subordinates, and proposing strategies to their boards and implementing them. We know that (most) CEOs have ideologies and personalities. We don’t know much about how these two interact to shape what firms do. Until now. Let’s start with a simple fact: a CEO can be anywhere from liberal to conservative in political ideology and can be either low or high on narcissism (self-grandeur and self-indulgence) and extraversion (communication need and ability). So there are narcissist liberals and extravert conservatives, and the other way around, and liberals and conservatives who are neither narcissists nor extraverts.

Does this matter? New research by Abhinav Gupta, Sucheta Nadkarni, and Misha Mariam published in Administrative Science Quarterly shows it does. Their idea was that CEOs’ narcissism and extraversion could make their companies act more ideologically. Narcissists think that their view of the world is the right one, and extraverts are good at persuading others. In both cases the result is that the firm becomes more ideological. (A firm doesn’t have to be liberal or conservative, of course, and would be ideologically neutral if its CEO were neutral.)

So what did the evidence show? Downsizing the firm is a typically conservative action and was in fact more often done by conservative CEOs – especially if they were extraverted. Corporate social responsibility (CSR) is a typically liberal action and was more often done by liberal CEOs – especially if they were narcissistic or extraverted.

There was one non-finding in the study’s interactions: narcissism does not make conservative CEOs downsize their firms more. There are many possible explanations, one of which is that narcissists think of themselves and everything associated with them as being grand and great. Shrinking the firm likely isn’t their first choice of action, even if there are good reasons to do so.

Clearly ideology and CEOs’ personalities shape firms. They do so in ways that can make CEOs pretty scary, given the mix of ideology and personality that one can find. CSR is a good thing for society, but if it is done by a narcissistic liberal CEO one has to wonder whether the firm’s resources are used well. Downsizing can be necessary, but if done by an extroverted conservative CEO one has to wonder whether others thought differently but were persuaded to reduce the firm’s employment more than they should. Both are scary thoughts.

The article can be downloaded for free for a limited time:

Gupta, A., S. Nadkarni, and M. Mariam
2018. "Dispositional Sources of Managerial Discretion: CEO Ideology, CEO Personality, and Firm Strategies." Administrative Science Quarterly, forthcoming.