Good-looking chief executives (CEOs) receive higher total compensation, produce better returns in their first days on the job and boost stock performance when they appear on television, according to the preliminary findings of a study by University of Wisconsin economists.
‘Beauty is Wealth: CEO Appearance and Shareholder Value’
, the study by Joseph Halford and Hung-Chia Hsu suggests there is a positive correlation between a company’s stock performance and their CEO’s ‘facial geometry’.
Their research involved a ‘facial attractiveness index’ to evaluate the appearance of 677 CEOs from US companies in the Standard & Poor’s (S&P 500).
Attractive bosses typically attract better total compensation and can improve the company’s share price upon taking up the position by creating a good first impression. The research also suggested that they perform better in negotiations and are more likely to land good deals.
Regular media appearances can also lift the share price. “CEO attractiveness may also affect shareholder value through the visibility channel, in which media attention may affect a firm’s investor base and stock prices,” Halford and Hsu report.
“We find that more attractive CEOs are associated with better stock returns on CEO-related television news days.” Interviewed by TV channel CNBC the researchers cited Marissa Mayer, CEO of Yahoo!, as a good example, but stressed that CEO attractiveness is only a small part of share performance.
Under Mayer’s tenure, Yahoo! shares have risen by more than 150%. “She scored 8.45 (out of 10) in our facial attractiveness index and is among the top 5% in our sample,” the economists added.
The study findings are derived from a series of tests, including an analysis of 1,830 merger and acquisition (M&A) deals over the period 1985 to 2012. “The evidence…suggests that more attractive CEOs receive more surpluses for their firms from M&A transactions, a finding consistent with the hypothesis that more attractive CEOs improve shareholder value through superior negotiating prowess,” the researchers note.
The correlation between the attractiveness of a CEO and a return on investment in their company was also advocated by John Graham, R Campbell and Manju Puri in a 2010 paper from Duke University. The three authors said that good looks made CEOs appear more competent and gave them better negotiating skills, enabling them to negotiate better deals for shareholders.
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