Nice CEOs do finish first: James Saft

October 12, 2016 4:21 PM EDT

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By James Saft

(Reuters) - (James Saft is a Reuters columnist. The opinions expressed are his own)

Nice chief executive officers do finish first, but sadly they perhaps too seldom get the chance.

While the popular idea of a successful CEO is closer to “Neutron Jack” Welch than Mr. Rodgers, a recent study shows that those who score well for “agreeableness” are associated with companies which show better operating results.

The study, published in July, took an unusual route to scoring CEOs for the “big five” personality traits: agreeableness, conscientiousness, extraversion, neuroticism, and openness to experience.

First they gathered transcripts of 70,000 company conference calls with analysts held between 2001 and 2013. They used data on word use from the Q&A portions, which, being unscripted, are more revealing of personality than prepared remarks which are usually highly edited and not authored by the CEO.

The database of word use was then scored for a range of linguistic traits which map to the personality traits, allowing them to both rate CEOs for the big five traits and then see how this relates to the strategies their firms pursued and the outcomes they achieved. For example, extraverts are less precise in speech, use fewer quantifiers, and are less explicit and less formal.

In terms of who gets to be a CEO it is not surprising that the group showed low levels of neuroticism, which is associated with emotional instability, anxiety and hostility.

While the mean scores for the other four traits were all more than three times higher than for neuroticism, it is striking that agreeableness was the fourth highest, with conscientiousness the highest. In other words, among personality trait holders only fretful neurotics are less likely to find themselves in the C-suite than nice people.

“There is a robust negative association between extraversion and return on assets and cash flow. Similarly, openness is negatively associated with profitability,” Ian Gow of Harvard University, Steven Kaplan and Anastasia Zakolyukina of the University of Chicago and David Larcker of Stanford University write. (

To be sure, the results are descriptive rather than strong evidence of causation, but the potential explanations for how personality drives strategy and performance are plausible.


Extraverts like to dominate, which may lead to less input from people with more information in the organization and poor decisions. Extraverts also are prone to enthusiasms which lead to aggressive, high-risk strategies and also which can tend to burn out and leave behind high sunk costs.

Openness looks bad for profitability but it is also associated with higher rates of research and development (I am looking at you, Elon Musk and Jeff Bezos). That R&D can pay off and is often heavier at earlier phases of high-growth companies. In other words, it is possible that there are different personality types prevalent, or even needed, in different phases of a given company's development.

Look at Twitter, now reported to be up for sale, for example, which has grown fantastically but not controlled costs. A highly open CEO may have made sense once, but perhaps now what is needed is a conscientious box-ticker to bring discipline.

As for agreeable CEOs, they tend to spend less on R&D but have far and away the strongest positive correlation to return on assets, both in current and future terms. Earlier research has posited that agreeable CEOs do well by encouraging cooperation and less hierarchical structures and cultures. While that might make a company less “results-orientated” it also might make it better able to make good medium- and long-term investment decisions.

Again, less agreeable CEOs are more likely to be found at firms which are innovative and take on more risk via the use of borrowed money.

One thing to bear in mind is that it is very difficult to end up CEO of a large company without being very confident. The extent to which that confidence is warranted and reflected in smart decisions is a lot less clear.

Some of this accords quite well with some of the traits observed in investors. James Montier, of GMO, has in the past observed that depressed people have a more realistic view of their own abilities and insights, in stark contrast to investors. A survey of over 500 professional fund managers found that 74 percent rate themselves as above average, a surprisingly high number given the difficulty more than half face in beating the market.

Perhaps in both investment and company leadership the real message is that what works in getting the job is quite different to what works in doing it.

(Editing by James Dalgleish)

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