The CEO characteristics that affect companies' performance and innovation ability

Koen Pauwels

Should we hire the manager with a military background or the one who parachutes in their spare time?

Amazon CEO Jeff Bezos spends his spare time on submarine treasure hunts for old NASA rockets. Mark Zuckerberg hunts wild boar with a bow and arrow, while Elon Musk claims that his hobby is his job. Maybe not so strange when it involves building space rockets, fast cars, and underground transport systems – and in the process becoming the second richest in the world.

Can the off-duty activities of top executives tell us something about how they will succeed at work? 

Presenting this work first in Oslo at a conference organized by BI, Adjunct Professor Koen Pauwels, together with colleagues, has examined much of the research on senior executives and the effects of their personality, experiences, and characteristics.

They found that everything from overconfidence, military background and political views influenced not only leadership style, but also innovation and value creation in the companies they led.

Age and education

Several studies show that younger executives tend to be more aggressive in their approach, while older managers are more concerned about their own financial and professional safety.

The latter are also on average slower to learn new technologies and less likely to seek growth through innovative strategies.

Some studies point out that companies are often more innovative if their top managers are highly educated. Senior managers with MBA degrees from reputable business schools have been shown to improve stock returns, often because these managers pursue more innovative or risky business models.

Hobbies and self-esteem

The fact that many senior executives spend their free time jumping out of planes, climbing rock walls, or making high-risk personal investments is perhaps not so strange when they are asked to balance between calculated risk and gambling at work.

However, these behaviours could potentially scare shareholders.

"Boards have to consider whether the same thing that made that person a successful CEO, for instance, also led them to engage in highly risky hobbies," said Stanford University professor David Larcker in a Wall Street Journal interview in 2019.

Previous studies have shown that managers with high self-esteem and a sensation-seeking behaviour are also more innovative at work because they are more creative and prefer change over routine.

This can turn into a “too-much-of-a-good-thing” situation, however, if the chief executive tends to overestimate their own ability to make good decisions and control situations.

Background and political views

Do you associate a military background with qualities such as a high level of confidence, willingness to take risks and solid leadership skills? Recent research suggests that companies led by people with military backgrounds generally innovate less, and in some cases even perform worse than others.

One reason for this may be that certain traditionally sought-after military leadership qualities, such as a disciplined and self-sacrificing personality, could potentially result in a slower, more bureaucratic corporate culture yielding lower and slower cash flows.

Interestingly, studies have also shown that these negative effects disappear in cases where the same manager also holds an MBA degree. Moreover, the same risk aversion and discipline may limit growth in boom times, but could work wonders in crisis situations, such as the ongoing pandemic.

In the United States, researchers have also explored the relationship between CEO’s political views and firm performance. While leaders with liberal values showed greater willingness to innovate, leaders with conservative values were more inclined to fear change.

Companies led by Republican-leaning executives also experience more internal conflict, weaker results, and show lower emphasis on corporate social responsibility, but at the same time had less debt and cases of tax evasion.

Knowledge gaps and recruiter challenges

Although there is extensive research on senior executives, there is still much we do not know or cannot draw conclusions on. The gender of CEOs is one example where the existing research is largely inconclusive.

Most importantly, researchers have primarily been concerned with the CEO as an individual, rather than looking at the management team as a whole.

Pauwel's research proposes many ways in which the CEO findings could differ for Chief Marketing Officers (CMOs), and calls for more research on how the fit versus diversity in background could hinder or help innovation and performance.

For instance, do companies innovate more and get better performance when the Chief Financial Officer likes to take risks, but the CMO is more conversative?

For executive recruiters, however, it is important to not let traditionally sought-after CEO traits distract them from identifying which specific qualities a company need to solve their specific challenges.

This means that everything from CEO demographics, personalities, experiences, and characteristics must be considered in order to ensure a strong and well-balanced top management team.  


You, Y.; Srinivasan, S.; Pauwels, K.; Joshi, A. (2020). How CEO/CMO characteristics affect innovation and stock returns: findings and future directions. Journal of the Academy of Marketing Science.  https://doi.org/10.1007/s11747-020-00732-4

Published 26. November 2020

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