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The CEO Effect

15 Feb 2023
 
AOM Insights
 
The CEO Effect
 

Elon Musk taking the helm of Twitter clearly shows the huge impact CEOs can have on their organizations. Here's a sample of AOM scholars revealing the many different ways organizations can benefit or suffer from their CEOs:

AOM scholars found that CEOs are responsible for nearly one-third of the total variance in how CSR is handled at their companies. (Related .)

New CEOs are more vulnerable to being fired when their predecessors stay on as board chair without a clear plan for departure, or the stock market reacts negatively to the appointment.

Chief executive officers whose companies hurt people or the environment turn to a tried-and-true way to remedy the harm. They funnel corporate money into philanthropy to make up for it.

CEOs who are perceived as conscientious are considered less risky and more able to translate risk into returns for shareholders, while CEOs seen as neurotic or extraverted are considered more risky and less able to translate risk into returns.

Successful transitions are due, in large part, to the leadership style of the incumbent CEO. While some CEOs set the stage for smooth hand-offs, others “hang on by their fingernails and sabotage prospective successors,” an AOM scholar says.

Needs for praise and domination push narcissistic CEOs to predictable behaviors that can affect organizations’ bottom lines.

Some CEOs of large U.S. companies may have figured out an ethically questionable way to get a good deal on company stock: issue negative press releases at just the right time.

Appointing women or racial minorities as CEOs can have the unfortunate effect that white male executives help their colleagues less. (Related .)

Being in the spotlight can trap celebrity CEOs into repeating behaviors that are not always in their organizations’ best interests. (Related and .)

For CEOs dealing with crises, having empathy is a Goldilocks situation. Too much or too little empathy can cause problems, but just the right amount can get organizations back on track. (Related .)

The narrower the age gap between a CEO and an older sibling intensifies risk-taking, as does having a brother or sister who is also a CEO.

While studies have shown that employees going through divorce is linked to decreased productivity and increased absenteeism, AOM scholars explain how the consequences of divorce can be even worse at the top. (Related .)

Until recently, researchers credited two factors with shaping organizational culture: “functionality perspective,” or how groups contend with shared experiences; and “leader-trait perspective,” or how a leader’s personality impacts group dynamics. AOM scholars reveal a third factor that influences organizational culture: a leader’s past cultural experience. (Related .)

A CEO does not get a good night’s sleep. The cranky CEO is a jerk to his employees the next day. The employees disengage from their work and do not perform as well. The company pays the price. (Related .)

Many researchers have studied how executives’ political ideologies can affect firm outcomes. The vast majority of that research has been conducted in the United States, where people often describe their political ideologies on a spectrum from liberal to conservative. But AOM scholars analyzed executives in Iran, “a political context that sharply deviates from the exclusively studied U.S. context.”

The impossible-to-please boss who always finds fault with your work might actually be inspiring you. But just how much inspiration depends on your personality.

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