While chief executives with big egos will tend to pursue grandiose strategies, their performance is no better than low-key CEOs, writes PROINSIAS O'MAHONY

IT'S LONG been joked that CEO stands for Chief Egotistical Officer. Some CEO egos are bigger than others, however, and new research shows that shareholders in companies fronted by a narcissistic executive are likely to experience a roller-coaster ride.

In a paper entitled It's all about me; narcissistic CEOs and their effects on company strategy and performance, Prof Donald Hambrick and Arjit Chatterjee of Pennsylvania State University relate how egotistical CEOs "gravitate to more extreme choices", tending to "pursue dynamic and grandiose strategies" that result in extra volatility; bigger wins but also bigger losses.

Defining narcissism as "the degree to which an individual has an inflated sense of self that is reflected in feelings of superiority and entitlement and a constant need for attention and admiration", the authors looked at a number of indicators to determine the more immodest of CEOs.

The size and prominence of the CEO's photo in the annual report was looked at, with the narcissistic executive seeking "a great deal of visibility in the annual report, both as an exercise of vanity and as a strong declaration that he/she is more important than all others in the firm".

Similarly, the number of times the CEO's name was mentioned in press releases indicated a "desire to be showcased, as well as an assertion of authority".

Length of entries in Who's Who volumes was analysed, as were cash compensation packages ("the narcissistic CEO believes that he/she is far more valuable than anyone else in the firm") and the CEO's use of first person singular pronouns such as "I", "me", "mine", "my" and "myself", which are taken to indicate self-absorption.

Concentrating on the computer and software industries, their filters produced a total of 111 CEOs. Large strategic changes and large mergers and acquisitions were much more common in companies fronted by narcissistic CEOs than among firms with a "steady Eddie" at the helm.

With a tendency to "engage in bold, attention-seeking behaviours", such CEOs engendered "wide swings in performance, or instability, from one period to the next".

Their "inflated self-views and intense need for attention will affect their identification and assessment of strategic alternatives: They will search for the novel and dramatic".

As to whether narcissists performed better or worse than conventional CEOs, however, "the results were null", with no indication that better or worse performance was likely.

The importance of ego has also been studied by Dr Paul Nutt, a professor of business at Ohio State University.

After decades of research, Nutt concluded that over one-third of all failed business decisions are ego-driven and nearly two-thirds of executives fail to explore alternatives once they set upon a course of action.

Other analysts have been somewhat kinder in their analysis of flamboyant bosses. Michael Maccoby, author of The Productive Narcissist: The Promise and Peril of Visionary Leadership, asks: "Why do we go along for the ride with narcissistic leaders? Because the upside is enormous."

No doubt thinking of success stories like Michael O'Leary and Steve Jobs (see inset), Maccoby argues that the leadership theory that "equates successful leadership with empathy, listening to others, sensitivity to feelings . . . and working through consensus" is the "business equivalent of wishful thinking".

Irrespective of who's right, it's likely that narcissistic leaders are likely to become more rather than less common in the coming years.

In the US, analysis of the responses given by 16,000 college students who filled out a Narcissistic Personality Inventory found that two-thirds of today's students score above-average on narcissism, a jump of more than 30 per cent compared with 1982.

Chatterjee and Hambrick's analysis would suggest many of those students will find their way into the upper echelons of corporate life.

"Because narcissism drives people to assume positions of power and influence and because the self-esteem associated with narcissism helps in professional advancement, we can anticipate that CEOs will tend, on average, to be more narcissistic than the general population."

In other words, that old chestnut about CEO meaning Chief Egotistical Officer has more than a little substance."Egoistic CEOs have a tendency to engage in bold attention-seeking behaviours