Consequences of CEO narcissism

Introduction

Research has shown that many CEOs and leaders demonstrate behaviours or tendencies that epitomise narcissism.  But the implications of this observation remain contentious.  The association between CEO narcissism and the performance of organisations, although studied intensely, has generated a complicated, and sometimes conflicting, pattern of results.  Many reasons can be proposed to explain these conflicts.  To illustrate

• CEO narcissism may be detrimental if this narcissism is extreme or pathological but not as detrimental, and perhaps sometimes beneficial, if this narcissism is moderate,
• one subtype, vulnerable narcissism, may be more detrimental than another subtype, grandiose narcissism,
• CEO narcissism may impair some features, but improve other features, of organisations,
• the degree to which CEO narcissism is detrimental may depend on the values, culture, and practices of the organisation.

Unethical, unlawful, or risky behaviours

Certainly, many studies have revealed that CEO narcissism does increase the likelihood of irresponsible behaviour in corporations, potentially culminating in scandals and similar complications.  For example, one study, published by Riera and Iborra in 2025, analysed 256 Spanish companies. To investigate whether CEO narcissism predicts irresponsible behaviour in these companies, the researchers first needed to apply two main techniques.  First, to estimate CEO narcissism, the researchers examined the LinkedIn profiles of the CEOs.  Consistent with past research on this topic, the researchers identified various properties of these profiles that tend predict narcissism, such as photographs of the CEO in the background photo, a summary section towards the end, and a high number of skills. 

Second, to ascertain whether the company perpetrated irresponsible behaviour—that is, behaviours that intentionally caused harm—the researchers first scanned public databases about these organisations, specifically the Factiva database and Google News.  The researchers then uncovered all reports of irresponsible acts the company had committed.  Finally, the researchers organised a panel of experts in law and management to rate the severity of these irresponsible acts. 

After controlling the gender diversity of the board, international diversity of the board, and whether the company is family owned, CEO narcissism was positively associated with irresponsible behaviours in the corporation.  In the structural equation model, the standardised B value exceeded 0.3, indicating a strong relationship.

Some of these irresponsible or unethical acts may benefit the organisation, at least transiently, but potentially compromise the organisation in the future. To illustrate, Olsen and Stekelberg (2016) explored whether CEO narcissism increases the likelihood the firm will utilise corporate tax shelters.  In this study, to estimate the narcissism of CEOs, the researchers integrated multiple sources of information, including

• CEO pay relative to the pay of the second highest earner in the firm,
• the degree to which a photograph of the CEO was prominent in the annual report—such as a photograph of the CEO alone that covers an entire page.

To identify tax shelters, the researchers applied a model that integrates various metrics, such as the difference between the income of a firm and the taxable income as well as size, return on asserts, and other measures.  After controlling firm performance and size, the findings reveal that narcissistic CEOs were more likely to utilise tax shelters. This aggressive tax avoidance may be beneficial initially but can significantly damage the future reputation and viability of companies. 

Typically, narcissistic CEOs choose these courses of action to benefit their personal reputation or wealth.  To illustrate, Buyl et al. (2019) showed that narcissistic CEOs of banks often endorse risky, and sometimes unsuitable, policies—especially if these acts could attract bonuses.  To gauge the narcissism of CEOs, the researchers assessed

• CEO pay relative to the pay of the second highest earner in the firm,
• the degree to which a photograph of the CEO was prominent in the annual report,
• the extent to which the CEO utilised first-person singular pronouns, such as I or my, in letters to shareholders,
• whether the CEO was the only signatory to these letters,
• the number of words the CEO wrote in the Marquis Who’s Who biography.

To measure the degree to which the CEO endorsed risky policies, the researchers assessed three practices that are emblematic of risk:

• the value of commercial loans relative to total assets,
• the level of noninterest income relative to net operating income, and
• the value of derivatives and off-balance sheet items relative to total assets.

Overall, CEO narcissism was positively associated with the inclination to endorse these risky practices and policies—especially when immediate financial returns attracted bonuses.  Because of these risks, the banks led by narcissistic CEOs did not recover as effectively after the collapse in 2008.  When the board included more outside directors and thus could monitor the firm better, the magnitude of this association between CEO narcissism and risky policies subsided. 

In many instances, the board or shareholders will be oblivious to these risky, unethical, or unlawful strategies of narcissistic CEOs.  That is, narcissistic CEOs are often inclined to communicate dishonestly to shareholders, such as utilise earnings management.  Earnings management refers to practices in which leaders distort financial statements to fulfill some goal or expectation, often flirting within the boundaries of accounting rules.   To illustrate,

• CEOs may advance revenue from a future period to improve their immediate financial results,
• companies may defer expenses to diminish the profit they report now—common if they want to demonstrate improvements in the future.  

Earnings management can benefit the CEO, at least transiently, but culminate in a range of complications.  For example, this practice could mislead directors, investors, or analysts, often translating to misinformed and unsuitable decisions.  If stakeholders discover this practice, the reputation of this company may plummet.  Furthermore, earnings management, although intended to be legal, can sometimes evolve into fraudulent activities, attracting fines and other legal consequences.

Capalbo et al. (2018) conducted a study to explore whether CEO narcissism predicts earnings management.  The researchers utilised a financial equation to estimate the level of earnings management.  As this research showed, CEO narcissism, derived from the tendency to use first-person singular pronouns during responses to analysts, was positively associated with earnings management. 

Selection of executive managers

To manage risks and challenges effectively, CEOs need to establish a capable team of executive managers.  One possibility, however, is that narcissistic CEOs may not establish a suitable team: a team able to manage risks and reach astute decisions.  Instead, when they need to recruit an executive, narcissistic CEOs may select the person who is most likely to fulfill their personal need—specifically, their need to maintain or to boost status.  To illustrate, CEOs may

• choose a small executive team so they maintain a high profile and assume responsibility for success,
• prefer an executive who is not particularly educated—or relatively inexperienced in their role— and thus not as likely to question decisions,
• choose an executive team in which only one or two members are experienced in the organisation and thus may want to maintain their position and satisfy the CEO.

To assess this possibility, Kruse et al. (2025) conducted a study of over 600 firms.  To gauge the level of narcissism in CEOs, the researchers analysed the answers of these leaders to questions during earnings calls: conference calls between the management and stakeholders of companies.  Specifically, they assessed the degree to which these answers include words that correspond to five dimensions of narcissism— authority, superiority, exhibitionism, vanity, and self-sufficiency—as identified and validated by Anglin et al. (2018).   Examples of these words include

• accomplished, mastermind, and virtuoso to represent authority,
• fiercest, shrewdest, or outstanding to represent superiority,
• fame, notable, or prominence to represent exhibitionism,
• grandest, pretty, or praiseworthy to represent vanity, and
• mastery, resilience, unfaltering to represent self-sufficiency.

Overall, CEO narcissism, when aggregated across these five dimensions, was negatively associated with the duration the executives had worked in their management role.   That is, these CEOs tended to prefer executives who were inexperienced in their role.  More specifically, when the CEOs were narcissistic, the executives had usually worked in their role for a short time but one or two executives had worked in their role over a very long period. CEO narcissism was not significantly associated with the size of these executive teams or the age of executives.  Nevertheless, the findings are consistent with the notion that CEOs, when narcissistic, do not likely to be challenged—and, therefore, may choose executive teams that fulfill this need.

Financial performance

The decisions of narcissistic CEOs, including some of these risky or unethical practices, may not always impair, and may sometimes improve, the financial position of firms. Indeed, some research, including a meta-analysis, conducted by Cragun et al., (2020), suggests that, on average, CEO narcissism may be positively associated with firm performance.  The meta-analysis that Cragun et al (2020) published analysed 19 studies that have explored how various measures of CEO narcissism are associated with firm performance, as gauged by return on assets, shareholder returns, and operating profit.  Across these studies, the research shows that CEO narcissism was positively related to firm performance.  Nevertheless, the authors raised several caveats:

• as a significant Q value indicates, the association between CEO narcissism and firm performance varied considerably across these studies,
• indeed, some research found that CEO narcissism, as gauged by the size of their signature, is inversely associated with return on investment and operating cash flow (Ham et al., 2018),
• narcissistic CEOs may pursue controversial, unethical, and even unlawful actions that improve firm performance now but could generate problems later. 

To illustrate these complications, Kim and Anderson (2024) showed that narcissistic CEOs may pursue strategies that simultaneously improve financial performance now but also increase the costs of borrowing in the future.  That is, because narcissistic CEOs embrace risky strategies, creditors tend to be wary.  Consequently, these creditors will demand higher returns, increasing the cost of borrowing.  As Kim and Anderson (2024) revealed, a 10% increase in narcissism—as measured by a disproportional use of first-person singular pronouns in speeches—corresponded roughly to a 5% increase in the cost of debt. 

Innovation

To improve financial performance, narcissistic CEOs may not only pursue risky, unethical, or unlawful strategies.  Instead, because narcissistic CEOs often inflate opportunities and capabilities, they may be able to inspire other people—including staff and investors—to pursue lofty goals.  That is, leaders who exhibit grandiose narcissism often express a bold vision of the future and, therefore, tend to be perceived as charismatic (Galvin et al., 2010). Inspired by this vision, staff may be more likely to embrace courageous goals and thus propose innovation solutions.  These innovations may enhance the performance of firms. 

To assess this possibility, Kraft (2022) conducted a meta-analysis of 78 studies that had explored this association between CEO narcissism and innovation—as measured by R&D intensity, entrepreneurial orientation, or innovative culture.  The meta-analysis also explored whether the gender of CEOs and the discretion that was bestowed on CEOs, such as the degree to which the culture tolerates risk, moderates this association between CEO narcissism and innovation. 

As their meta-analysis structural equation modelling revealed, CEO narcissism was positively associated with innovation but not firm performance.  However, the association between CEO narcissism and firm performance was nuanced:

• the innovation that coincided with narcissistic CEOs did improve firm performance
• but the direct association between CEO narcissism and firm performance was negative—implying that other problems, such as costly risks, offset the benefits of innovation,
• both of these pathways were more pronounced in males than females and in nations that tolerate uncertainty and risk.

As these findings imply, narcissistic CEOs, who often seem bold and confident, may stimulate innovation.  But the risky or unethical strategies these CEOs pursue, often because they are bold and confident, tend to offset the benefits of this innovation. 

Attempts to manage these risks

Many studies indicate that narcissistic CEOs will often pursue risky or unethical strategies—especially if they can readily conceal these behaviours.  However, narcissistic CEOs are also especially concerned about their reputation.  To preserve their reputation, these CEOs may thus be more inclined than other leaders to refrain from environmental, social, or governance strategies that may attract unfavourable media attention. 

To explore this possibility, Martínez-Ferrero et al. (2024) extracted data from several databases about 175 Spanish firms.  First, the researchers identified the degree to which each of these firms had attracted unfavourable media coverage around environmental, social, and governance practices. Second, the researchers estimated the narcissism of CEOs from four indicators—including the degree to which the photograph of this CEO was prominent in annual reports, the frequency with which the CEO was mentioned in press releases about the company, and CEO remuneration.

As regression analyses revealed, CEO narcissism was negatively associated with adverse media attention around environmental, social, or governance strategies.  This association is more pronounced when CEOs were granted more power in the firm—either because they owned shares in the company, chaired the board, or had accrued significant experience. 

These findings, at first glance, underscore a benefit of CEO narcissism.  However, Kind et al, (2023) revealed this benefit does not apply when CEO narcissism is especially high.  In this study, the researchers assumed the size of CEO signatures is a proxy measure of narcissism—a measure that has been validated previously (Dillon, 1988; Ham et al., 2017).  In this study, compared to CEOs whose signature was very small, CEOs whose signature was moderately large tended to lead companies in which few environmental, social, and governance concerns were reported.  In contrast, compared to CEOs whose signature was moderately large, CEOs whose signature was very large tended to lead companies in which many environmental, social, and governance concerns were reported. 

Moderate versus high levels of CEO narcissism

These results imply that moderate levels of CEO narcissism may not be detrimental to organisations, whereas high levels of CEO narcissism could be more damaging to organisations.  Other studies have also confirmed this possibility (e.g., Grijalva et al., 2015; Uppal, 2020).  To illustrate,

similarly, Uppal (2020) showed that firm performance was better when CEOs were moderate on measures of narcissism rather than very low or very high on these measures.

Grijalva et al. (2015) revealed that leaders who were moderate on measures of narcissism were perceived as more effective leaders than leaders who received very low or high scores on these measures, as substantiated by a meta-analysis,

Corporate social responsibility

Arguably, CEO narcissism may be especially detrimental in some circumstances and not as detrimental, or even beneficial, in other circumstances.  For example, in organisations that are heavily committed to philanthropic ventures and community support, often called corporate social responsibility, the adverse effects of CEO narcissism may be especially pronounced.

To illustrate, in many organisations, narcissistic CEOs, when interacting with stakeholders from outside the organisation, may display a more caring, charitable, and benevolent character.  They may, for example, champion many social causes to impress customers or sponsors. When managers or staff observe this behaviour, they recognise a discrepancy between the leadership style of this CEO at work and the character this person likes to portray in other settings.  Because of this discrepancy, these observers may perceive the leader as hypocritical.  As Greenbaum et al. (2015) revealed, this perception of hypocrisy elicits uncertainty about how the leader will respond in the future, increasing the likelihood that staff will feel uncommitted to their work and leave the organisation.

Consistent with this premise, Yin et al (2024) revealed that abusive CEOs—a style that is more common in narcissistic individuals (Finney et al., 2021)—were more likely to impair the innovation and performance of organisations that strongly endorse corporate social responsibility.  In one study, 717 executive managers and 316 of their corresponding CEOs completed a survey.  Specifically,

• the chief marketing officer answered questions that assess the degree to which the CEO is abusive, such as “My leader tells me my thoughts or feelings are stupid” (Mitchell & Ambrose, 2007),
• the chief operating officer answered questions that assess the extent to which the organisation prioritises corporate social responsibility, such as “Our company integrates charitable contributions into its business activities” (Carroll, 1991),
• the CEO evaluated the degree to which the executive managers coordinate and collaborate effectively, such as “The (senior executives) let each other know when their actions affect another team member’s work” (Simsek et al., 2005).

The researchers also utilised the percentage of sales derived from new products to measure innovation and return on assets to measure performance.  The analyses revealed that

• abusive supervision was inversely associated with the degree to which the executives coordinated and collaborated effectively as well as negatively related to innovation and performance,
• if the organisation prioritised corporate social responsibility, the adverse effect of abusive supervision on the degree to which the executives coordinated and collaborated effectively was more pronounced.

Therefore, although this study measured CEO abusive behaviour, rather than CEO narcissism, the findings are consistent with the notion that narcissism may be especially detrimental in organisations that prioritise corporate social responsibility. Leaders should not assume that corporate social responsibility may offset the deleterious effects of abuse or narcissism.