Does narcissism, a common trait among leaders, influence CEO compensation? This study explores the impact of board gender diversity on the relationship between board chair narcissism and CEO compensation. Recognizing the board's crucial role in compensation decisions, it extends previous research primarily focused on CEO traits. Using S&P 500 Index data from 2008 to 2018, the study tests two hypotheses: first, that board chair narcissism negatively affects CEO compensation (H1), and second, that board gender diversity positively moderates this relationship (H2). Although statistical significance was not attained for both hypotheses, the findings align with initial expectations and shed light on the intricate dynamics at play, while also indicating directions for future research. Consequently, this study contributes to the burgeoning field at the intersection of psychology and corporate governance, enhancing our comprehension of CEO compensation as well as gender diversity within boardrooms.
Table of Contents
1. Introduction
2. Theoretical Framework and Hypotheses
2.1. Upper Echelons Theory
2.2. Narcissism in general and among executives
2.3. The Chairman of the Board
2.4. CEO compensation
2.5. Ego and CEO compensation: The role of narcissistic board chairs
2.6. The moderating effect of board gender diversity
3. Methodology
3.1. Sample
3.2. Measure
3.3. Control variables
3.4. Data analysis
4. Results
5. Discussion
6. Theoretical and Practical Implications
7. Limitations and directions for future research
8. Conclusion
Objectives & Core Themes
This master's thesis examines the influence of board chair narcissism on CEO compensation and investigates whether board gender diversity acts as a moderating factor in this relationship. By integrating psychological concepts into the corporate governance framework, the research seeks to uncover how the personality of the board chair affects major financial decision-making processes in large organizations.
- The impact of board chair narcissism on CEO pay levels.
- The moderating role of board gender diversity in compensation governance.
- Application of Upper Echelons Theory to board chair behavior.
- Methodological use of videometric "thin slice" approaches to assess personality.
- Analysis of S&P 500 company data to understand boardroom dynamics.
Excerpt from the Book
2.5. Ego and CEO compensation: The role of narcissistic board chairs
Building upon the UET proposed by Hambrick and Mason (1984), it is posited that the leadership personality of the board chair, characterized by narcissistic tendencies, plays a pivotal role in shaping their decision-making processes and actions. Consequently, this influences their ability to exert control over the CEO's compensation. The underlying premise of the argument is rooted in the notion that narcissistic individuals possess distinct traits that empower them to exert influence and manipulate others, thereby molding their environment to align with their own perspectives and ideas (O’Reilly et al., 2014).
Narcissistic individuals, characterized by feelings of envy and resentment towards others (Rosenthal & Pittinsky, 2006), often exhibit behaviors aimed at diminishing or undermining the achievements and positive qualities of others (Campbell, Reeder, Sedikides, & Elliot, 2000). This provides a foundational argument supporting the notion that board chairs with narcissistic personalities utilize their influence over the board to diminish the CEO's compensation. Due to their innate need to feel superior to others (e.g. Chatterjee & Hambrick, 2007; Chatterjee & Pollock, 2017; Rosenthal & Pittinsky, 2006), they perceive others as a threat to their grandiose self-image. Consequently, they may engage in actions that undermine or belittle others as a means to preserve their sense of superiority (Lubit, 2002). Indeed, it is crucial to mention that narcissism exerts a substantial influence on judgment and decision-making processes (Campbell et al., 2011).
Summary of Chapters
1. Introduction: Outlines the prevalence of narcissism in leadership and establishes the research gap regarding the role of the board of directors in CEO compensation decisions.
2. Theoretical Framework and Hypotheses: Reviews the Upper Echelons Theory and existing literature on narcissism, board chairs, and gender diversity to formulate the research hypotheses.
3. Methodology: Details the sample selection from the S&P 500, the videometric measurement of narcissism, and the analytical framework using random-effects regression models.
4. Results: Presents descriptive statistics and correlation analyses, noting that the data shows trends consistent with the hypotheses but lacks statistical significance.
5. Discussion: Explores potential reasons for the lack of statistical significance, suggesting measurement nuances and the complexity of board interactions as factors.
6. Theoretical and Practical Implications: Discusses the contribution to UET and provides actionable advice for companies on improving corporate governance through training and board diversity.
7. Limitations and directions for future research: Critically evaluates the study's scope, including measurement methods and sample constraints, while proposing more granular future studies.
8. Conclusion: Summarizes the study’s effort in linking board chair traits to executive compensation and emphasizes the importance of ongoing research in this area.
Keywords
Narcissism, CEO Compensation, Board Gender Diversity, Upper Echelons Theory, Corporate Governance, Board Chair, Personality Traits, Executive Leadership, S&P 500, Decision Making, Board Dynamics, Organizational Behavior, Compensation Committee, Blau Index, Management.
Frequently Asked Questions
What is the core focus of this thesis?
The thesis examines the relationship between the narcissism of a board chair and the compensation levels of the CEO, specifically investigating whether a gender-diverse board can moderate this influence.
Which theoretical framework supports this research?
The research is primarily grounded in the Upper Echelons Theory, which suggests that the characteristics of top executives significantly influence an organization's strategic decisions and outcomes.
What is the primary methodology used in the study?
The study employs an empirical analysis of S&P 500 companies from 2008 to 2018 using random-effects regression models and a videometric "thin slice" approach to measure board chair narcissism.
What are the main research hypotheses?
The study tests two hypotheses: H1, that board chair narcissism negatively impacts CEO compensation, and H2, that board gender diversity positively moderates this negative relationship.
What were the empirical findings?
While the findings aligned with the anticipated directions, neither of the two hypotheses reached statistical significance within the study's dataset.
Why is gender diversity considered a moderator in this context?
Gender diversity is expected to enhance board independence and oversight, making it more difficult for a narcissistic board chair to exert undue influence or manipulation over compensation decisions.
How was the board chair's personality measured?
The study used the 16-item short version of the Narcissistic Personality Inventory (NPI) based on an assessment of video clips of the board chairs, a "thin slice" videometric method.
What practical implications does the author suggest?
The author suggests that companies should implement personality diversity metrics, improve board training programs, and foster independent compensation committees to mitigate potential bias from narcissistic leaders.
How does this study differ from previous research?
Unlike most prior studies that focus on the personality of the CEO, this research shifts the focus to the Chairman of the Board as a critical but overlooked leadership figure in compensation governance.
- Citation du texte
- Anonym (Auteur), 2023, Chair narcissism and CEO remuneration. The influence of gender diversity, Munich, GRIN Verlag, https://www.grin.com/document/1420802
