Companies with Machiavellian CEOs benefit more: Study

Companies whose CEOs possess Machiavellian traits such as sneakiness, cunningness, and lack of a moral code are able to save more, suggests a study.

Despite ample evidence that dark personality traits pose financial and managerial risks to organisations, traits such as narcissism, psychopathy and machiavellianism are ubiquitous among CEOs.

Their prevalence on corporate boards – nearly three times the general population – suggests that, on some levels, anti-social behaviour may benefit business management.

The study, published in the Strategic Management Journal, showed that companies with Machiavellian CEOs have a net income savings of over 6.6 per cent on firm costs. Negotiating important firm costs is fundamental, and has significant impact on organisations.

“Highly Machiavellian personalities consistently excel in situations that are stressful, uncertain, unstructured and have a high degree of face-to-face interaction – all of which are commiserate with the CEO position and high-level negotiations,” said Federico Aime, a management professor at Oklahoma State University.

To determine CEOs higher on the Machiavellian scale (high Machs), the team aggregated public video of 198 CEOs at S&P 500 firms. Trained psychology professionals then evaluated the videos using an established scale for Machiavellianism.

The study found that companies with Machiavellian CEOs paid 12.11 per cent lower acquisition premiums, representing approximately $157 million or 3.6 per cent of the average deal.

Companies with high Mach CEOs also paid $101.19 million less on goods sold and $35.8 million less on debt interest, representing a total of 6.6 per cent savings on the average company’s net income.

The researchers explained that high Mach expectations and cultural norms filtered down to bargaining performance on production and financial costs.

“It should be no surprise that CEOs with a Machiavellian focus on bargaining pay less on acquisition premiums,” said co-author Aaron D. Hill.

“Machiavellianism can drive CEOs to gather more bargaining information because their inherent distrust, to leverage social interactions and coalitions, and to manipulate others allow them to win.”

The team noted that while high Mach CEOs seem to lower company costs, this might not outweigh the risks of the personality trait. Yet, they said there may also be unexplored benefits to Machiavellianism for CEOs.

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