As you know, there can be a long list of individual differences, including the big five personality types. However, those personality traits must be relevant, as well as interesting, for explaining important outcomes. At a time when the rate of technological innovation and globalization is increasing, openness to experience might be one personality trait in CEOs that might be useful to explain several firm-level outcomes. We did not consider openness to experience as a predictor for the firm-level outcomes we were considering.

What other capability cues could be tested in the future to expand on the theory?

In our 2011 paper, we defined capability cues as “contextual signals that decision makers might reasonably interpret as indicators of their current level of overall ability.” We added the word “current” in our definition, keeping in mind the recency effects of contextual signals. However, if we consider the idea that capability cues can be distinct and definite, as well as ambient in the context and surroundings, several interesting capability cues can be studied. These include business school education, one’s social class or milieu, one’s functional background, or even one’s club memberships. For example, in business schools, students are often asked to pretend they are the top executives of a large firm, and they are routinely asked to answer the question “what would you do?” These signals can be interpreted by some as an indicator of their (current) ability. We would not find similar capability cues in an engineering school.

Question 2. Why two studies? Did the study start that way, or were the questions of generalizability from reviewers that necessitated a second study?

The initial version of our 2011 paper was a single study, but we were asked to conduct a second study to alleviate reviewers’ concerns. But those concerns were not about generalizability. One reviewer was not convinced that the magnitudes of the effects reported in our results were definitive enough – in terms of variance explained – to warrant publication, and categorically mentioned that s/he would be more convinced if we could replicate our findings in another study. Another reviewer was not fully convinced that we had captured narcissism using our unobtrusive indicators. The editor strongly recommended a second study – either a laboratory experiment or a field follow-up – that would corroborate the findings of our first study. Fortunately, results of the second study lined up reasonably closely with the initial study.

Question 3. There has been a lot of discussion about the appropriateness of using archival proxies as valid measures of executive psychological and cognitive constructs. Was there pushback on the use of your 2007 CEO narcissism measure? What advice can you give to scholars who desire to create or use similar, proxy-based measures of executive personal characteristics?

In our 2007 paper, two reviewers and the editor pushed us to either develop a more proximate measure of narcissism or to provide substantial additional validation of our measure with another data source. High-quality research on the important topic of executive personality is exceedingly difficult to conduct, simply from the standpoint of data availability. Executives – especially those in large public companies – are generally not willing to respond to psychological batteries, and the coding of published biographies carries its own limitations. One of the most promising and feasible alternatives is to use unobtrusive indicators of personality, which we did. We went to considerable lengths to justify and demonstrate the validity of our individual indicators and the overall index. We interviewed corporate communications consultants and executive compensation consultants and provided evidence that the narcissism scores were much more a reflection of individual CEOs (those who moved from firm to firm showed great consistency) than of the firms themselves (successive CEOs in a given firm exhibited little consistency). We also asked a panel of experienced securities analysts (who specialized in the technology sector) to rate the degree of narcissism of the CEOs of the forty largest firms in the sample. The analysts exhibited strong inter-rater reliability and, more importantly, rated the CEOs very much in line with the unobtrusive index scores. Still, we would readily acknowledge that our index is an imperfect proxy of executive narcissism.

In our 2007 study of the computer industry, we had experimented with numerous variations of measures and finally used the ones that demonstrated greatest inter-item reliability and coding feasibility. However, a few years later, when we extended our measures to other industries, we had to discard the personal pronoun measure because the reliability of the overall index was not good. On the other hand, we found that our other measures (relative cash, relative non-cash, CEO photographs, and relative prominence in press releases) were robust in various industries. It is indeed gratifying to note that our index has been replicated by scholars in management, accounting, and finance, and that is has strong predictive validity.

For scholars who want to develop unobtrusive measures of executive personality characteristics, we have two pieces of advice. First, you should test generalizability of your index by experimenting with your measures in more than one industry. Second, you should be willing to experiment. An index that uses indirect proxies for executive personality invariably needs a lot of refinement.

Question 4. Regarding practical implications, what advice would you give boards and shareholders? This could consider CEO selection, CEO incentives, CEO dismissal, or CEO-board interactions.

We think it is important for boards and other stakeholders to understand that the CEO is a finite human being. As investors in the stock market have multiplied, and as CEO influence over firm-level outcomes has grown over the decades, CEOs of publicly traded firms are now constantly under the public gaze of analysts, journalists, and shareholders. More and more regulations are being put in place to reign in executive excesses. Yet, evidence shows that the personal qualities of top executives continue to influence their decision-making – for good and for ill. If boards appreciate this factor, they might be able to make better recruitment decisions from the executive labor market. For example, firm performance can be formulated as the outcome of the joint effect of CEO narcissism and the incentive design or the preferred business strategy of the firm. Incentive designs (e.g., stock options) that encourage CEOs to take risks often require boldness. Yet, not everyone finds performance-contingent pay to be attractive. Cable and Judge (1994) found that individuals with internal locus of control, high risk propensity, and high self-efficacy favored contingent over fixed pay. By extension, narcissistic CEOs may perform better in situations where they can pursue their self-enhancement objective and, at the same time, earn the incentive pay for doing so (Wowak & Hambrick, 2010). In a related vein, a fit between the firm’s preferred business strategy – for instance, defender, prospector, or analyzer (Miles & Snow, 1978) – and the current CEO’s governing style is vital. Narcissistic CEOs might prefer prospector strategies. However, if engineering problems need to be addressed first, the decision to hire a CEO with narcissistic tendencies may court disaster because s/he is likely to pursue entrepreneurial issues.

Cable, D. M., & Judge, T. A. 1994. Pay preference and job search decisions: A person-organization fit perspective. Personnel Psychology, 47: 317-348

Miles, R. E., & Snow, C. C. 1978. Organizational strategy, structure, and process. New York: McGraw-Hill

Wowak, A. J., & Hambrick, D. C. 2010. A model of person-pay interaction: How execurtives vary in theri repsonses to compensation arrangements. Strategic Management Journal, 31: 803-821.

Question 5. This study focuses on capability cues and the CEO’s potential interpretation of these cues (as filtered by the specific personality trait of narcissism). How would you expect different audience’s expectations and sources of these capability cues to influence this process? For example, the social praise from a fellow well-respected CEO might differentially increase the interaction between social praise and narcissism, compared to a generic media article expressing praise.

This is an intriguing observation. We would expect that the sources of the capability cues would have differential impact on CEOs with narcissistic tendencies. Narcissists are especially drawn to alternatives that give them an enhanced likelihood of applause. They draw their utility from adulation that comes from the risky decision itself. The outcome of the act is an occasion for additional adulation, but the narcissist seems to be satisfied as long as the crowd is enthralled, irrespective of the outcome. The sources of these signals should matter for the narcissist. Some of these factors could be the size of the audience, the respectability of the audience, or if the people in the audience matter to the narcissist in some way or the other. Although we did not theorize about this, in our 2011 paper, we considered media praise only from the most widely-circulated newspapers and business magazines, and media awards only from the most prominent business publications and major organizations.