One of my irritations with business today is CEO pay. I’m not against someone earning what they can and what they are worth, but is anyone truly worth the multiple-millions paid to some of today’s CEO’s? According to this article, apparently not.

… in a study of 128 large companies averaging $6.5 billion in assets and 16,000 employees, Bradley R. Agle, Nandu J. Nagarajan, and Dhinu Srinivasan of the University of Pittsburgh and Jeffrey A. Sonnenfeld of Yale University found that whether or not a CEO is charismatic has little bearing on an organization’s bottom line (p. 56).

What the study does find is that the more charismatic the CEO, the more volatile the company’s earnings. Because of their personality, charismatic CEO’s are more likely to take larger risks, which either lead to larger gains or larger losses. But in the end, measures of performance (stock returns, returns on assets, returns on sales, returns on equity, and sales growth) are no better or worse than the non-charismatic CEO.

A note to executive search committee members on the board of directors:

To have a significant and lasting impact, leaders need to look to other factors driving performance and not rely on their likeability, the force of their personality, or the size of their egos. To ignore these other factors is to miss out on a real opportunity to make a positive difference (p. 57).

— How Does Leadership Personality Affect Performance. (2007, Winter). Leader to Leader. http://www3.interscience.wiley.com/cgi-bin/abstract/114030670/ABSTRACT.

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