Study Says ‘Psychopathic’ Leaders Destroy Shareholder Wealth

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What should you do when you see a surfeit of the words “I, me and myself” in a company’s annual reports? Sell the stock because that indicates some psychopathic traits of Corporate Leadership.

That’s the quick piece of advice emerging from an academic study that evaluated the effects of psychopathic traits in corporate leadership on stock market returns.

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“Our empirical analysis supported the hypothesis that psychopathic-like tendencies exhibited by top management teams are particularly destructive from the point of view of shareholder wealth,” the U.K. study concluded in unambiguous terms.

“We find that language characteristic of psychopaths present in annual report narratives, questionable integrity, excessive risk-taking and failure to contribute to charitable undertakings tend to reduce future shareholder wealth.”

The authors said they were “able to predict significant falls in stock prices of companies which are deemed likely to have psychopaths in their echelons of power.”

The study titled, “ Psychopathic Traits of Corporate Leadership as Predictors of Future Stock Returns,” was conducted by Tomasz Piotr Wisniewski and Ayman M.A. Omar of the University of Leicester School of Business, and Liafisu Sina Yekini of Coventry University’s School of Economics, Finance and Accounting.

The authors have brought a theoretical and academic rigor to the study but particularly telling is their observation that concentration of psychopaths is particularly high in prisons and boardrooms. Their qualitative assessments echo loudly too, especially as corporate America examines the aftermath of the boardroom shuffle at Uber after an independent investigation of sexual harassment, misogyny, intimidatory tactics, etc. at the hail-ride company, believed to be the world’s most valued startup.

“Driven by their insatiable appetite for money, power and prestige, these individuals are attracted to the corporate world and often end up in positions of power,” the authors said.

Such leaders’ “insincere charm is sometimes mistaken for charisma, their ruthlessness may be viewed by some as the ability to make calculated business decisions, and their mastery of deception helps them to cover up their counterproductive” activities, the study added.

Psychopathic Traits of Corporate Leadership - methodology

In the study, the researchers focused not on individuals but the entire boardroom and senior management, believing there is collective responsibility at the top. They calculated the frequencies with which certain words including “I, me and myself” appear in annual reports, and converted frequency of these occurrences into z-scores. They also evaluated and created similar measures for risk, empathy, and lies. Finally, their measure of corporate psychopathic language was as follows:

Psychopathic language = Z(Self Reference) –Z(Human Interest) + Z(Aggression) + Z(Blame).

The study also evaluated the implications of hiring psychopaths into positions of leadership and pointed out signals to watch out for when hiring and monitoring boardroom performance. Suggested measures include detailed background checks; psychological evaluation of individuals being considered for positions of responsibility; internal controls and procedures; anonymous whistleblower procedures and redressal mechanisms.

“Future research could focus on a broader spectrum of indicators, which we were unable to construct in the U.K. context due to data unavailability. For instance, staff turnover, employee job satisfaction or public perception of a company’s ethical stance could be potentially useful in this identification exercise,” the authors said.

Wisniewski, Tomasz Piotr and Yekini, Liafisu Sina and Omar, Ayman M. A., Psychopathic Traits of Corporate Leadership as Predictors of Future Stock Returns (June 12, 2017). Available at SSRN:

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