A recent study soon to be presented before the American Academy of Management subjects the effect of narcissistic bosses on the organizations they head to statistical analysis. As reported in The Economist, the authors of the study use publicly available information to measure the narcissism of the senior executives of 100+ firms in the software and computer industries. These were such things as the size of the CEO’s photo in reports to shareholders, or the length of his or her entry in “Who’s Who.” The effect on the firm was measured by its stock price.
Unsuprisingly, the general finding was that narcissistic CEOs made bolder, more dramatic moves, resulting in either greater positive – or greater negative – moves in their companies’ stock prices than those of less self-involved executives. Moreover, the stock prices of narcissistic CEOs’ companies were more volatile than the average.
Is there any advantage, then, hidden in this sort of finding? Should an invester seeking greater long-term growth look for companies run by large-ego bosses, believing that the risk/reward ratio fits his or her investment objectives? Perhaps a long-term growth fund, the Narcissism Fund, should be formed to provide an investment vehicle filled with such securities.
On the other hand, the investment value of such an approach for the classic absentee-owner – that is, one who views company stock ownership solely as a speculative investment, and enters and leaves particular securities based on assorted technical (or even value-based) signals, rather than because of a propietory, Warren Buffet-style knowledge of and belief in the business (and its managers) – might be an interesting basis for a study. Perhaps someone should examine the flow of investment money into and out of the stock of various companies, and compare that with the narcissism rating of their CEOs. Might there actually be a correlation? It would be interesting, also, to compare the inflow/outflow of such money with the arrival/departure of narcissistic bosses. Is the money flow as dramatic and volatile as the behavior of such CEOs and the performance of their companies’ stocks?