Highly extroverted CEOs are bad for business

There's a relationship between a leader's personality type and their firm's financial performance.

by Management Today

Can a chief executive’s personality predict a firm’s performance? Those who have been following the fall from grace of WeWork, with its pot-smoking, private jet-loving CEO Adam Neumann, might think the idea has legs. The successes of emotionally intelligent CEOs such as Microsoft’s Satya Nadella or General Motors’ Mary Barra also give credence to the idea. 

Academics from Texas Christian, Texas A&M, Utah State and Georgia universities have found a correlation between CEOs who displayed certain personality traits and a firm’s financial performance. The authors analysed the Q&A portion of 200 CEOs’ quarterly earnings calls with analysts, and gave the bosses scores for three of the big personality traits: conscientiousness, neuroticism and extroversion. They then applied their findings to the analyst calls of 3,000 CEOs over 22 years, to give them a healthy sample size.

In a recent Harvard Business Review article, the authors conclude: “Firms of more conscientious CEOs tended to have lower levels of stock volatility, but were able to generate higher stock returns at increasing levels of risk. In contrast, firms of more neurotic and extroverted CEOs tended to experience higher levels of stock volatility, but were less able to translate this high risk into higher shareholder returns. In fact, for the firms of highly extroverted CEOs, there was a negative relationship between stock risk and shareholder returns.”

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