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Management

Tall, good with people, and smart? You're CEO material

Samuli Knüpfer

Height, non-cognitive skills, and cognitive prowess are all essential to become a CEO, according to Finance professor Samuli Knüpfer at BI Norwegian Business School.

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By using data on 1.3 million Swedish men, Knüpfer and his co-authors compared non-cognitive and cognitive ability, and height, at the age of 18 against their occupation.

Among the main findings is that the median large-company CEO belongs to the top five percent of the population in the combination of the three traits.

“CEOs that run the largest firms in the economy have exceptionally high trait values. CEOs managing family firms have lower trait values, particularly if they come from the founding family but are not the founders themselves” says Knüpfer.

Explaining the pay gap

The higher trait values CEOs possess cannot, however, explain the large pay gap between CEOs and other people.

While the large-firm CEOs are exceptional in their traits, their pay is even more so. Like in other countries, the large-firm CEOs in Sweden belong to the top 0.1 percent of the income distribution. Only about one-tenth of the pay premium can be attributed to the three traits.

This means that even though CEOs belong to an “elite” group, the traits are not the scarce resource that explains why CEOs are paid so much.

Not enough

As a testimony to this observation, there are 100 times as many men in middle management that have better trait combinations than CEOs.

“Our research shows that height, non-cognitive, and cognitive ability are some of the essential traits that make it easier to to achieve a CEO position. But it’s naturally not enough to have just these traits. Many talented middle managers likely lack some other key characteristics such as drive, experience, and networks. Luck certainly plays a role and everybody do not even want to become CEOs,“ says Knüpfer.

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Reference: 

Adams, Renee Birgit; Keloharju, Matti; Knüpfer, Samuli. (2018). Are CEOs born leaders? Lessons from traits of a million individuals. Journal of Financial Economics 2018; Volum 130. (2) p. 392-408. 

Text: Henrik Oliver Aasebøe Stølen, Senior Communication Advisor, BI

 

Published 30. August 2019

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