Narcissistic CEOs and Executive Compensation

Narcissism is characterized by traits such as dominance, self-confidence, a sense of entitlement, grandiosity, and low empathy. There is growing evidence that individuals with these characteristics often emerge as leaders, and that narcissistic CEOs may make more impulsive and risky decisions. We suggest that these tendencies may also affect how compensation is allocated among top management teams. Using employee ratings of personality for the CEOs of 32 prominent high-technology firms, we investigate whether more narcissistic CEOs have compensation packages that are systematically different from their less narcissistic peers, and specifically whether these differences increase the longer the CEO stays with the firm. As predicted, we find that more narcissistic CEOs who have been with their firm longer receive more total direct compensation (salary, bonus, and stock options), have more money in their total shareholdings, and have larger discrepancies between their own (higher) compensation and the other members of their team.