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Signing away success

john hancockNarcissism is a bad sign.

Seems obvious, but that’s the title of a new report by researchers at the University of Maryland, College Park, who studied the correlation between narcissism — as measured by the size of a CEO’s signature — and the success of his or her company.

Companies led by a narcissistic CEO tend to perform poorly, especially for firms in more uncertain environments, said study author Nick Seybert, an accounting professor in the Robert H. Smith School of Business.

Seybert and his team — graduate student Charles Ham and Sean Wang at the University of North Carolina — sifted through 400 Securities and Exchange Commission filings to pull out CEOs signatures.

They found larger, more embellished signatures gracing the pages of firms that tended to over-invest in capital expenditures and acquisitions, received lower returns on assets and paid lower dividends to shareholders.

The study drew upon existing psychological research linking a large signature to an inflated ego, which is one of the defining characteristics of a narcissist. Such a person also tends to take excessive risks, make decisions without consulting others, dismiss feedback and blame failure on external circumstances.

Sounds like a keeper.

“Despite prior findings showing risk-taking sometimes is good, our results show that risky behavior from these narcissistic CEOs generates negative, declining performance over the long term – especially in firms that are younger, small and/or R&D-intensive,” Seybert said in a statement.

Prior studies about CEO narcissism focused on other indicators, such as the size of the individual’s photo in an annual report. But Seybert said those variables likely have more to do with the marketing department’s tactics than the CEO’s leadership style.

“The signature derives directly from its source and indicates personality according to decades of psychology research,” he said.

The study also found that CEOs labeled narcissistic were more likely to receive higher cash and stock compensation than their more tolerable CEO counterparts.

“Simply and counterintuitively, narcissism pays off for the CEO at the expense of the firm,” Seybert said. “Corporate directors should keep their CEO’s narcissism in check and think twice about pursuing the ego-driven ‘superstar CEO,’ especially in an era of scrutiny on CEO overcompensation, which peaked in public outrage a few years ago.”

That’s good advice. Here’s another tidbit: Write smaller, or risk being singled out, accused of having a personality disorder and blamed for your firm’s shortcomings.

Signing off,

alissa