Does the CEO Have to be Attractive to Succeed?

Is beauty in the eye of the shareholder? In a new study conducted by researchers at the University of Wisconsin, hiring good-looking executives is good for the bottom line. The study, Beauty is Wealth: CEO Appearance and Shareholder Values, deployed a ‘Facial Attractiveness Index’ to value the appearance of 677 chief executives from the S&P 500. "Attractive" bosses received better compensation – but more than that: share prices can rise if the CEO is "attractive."

Researchers examined whether and how the appearance of CEOs affects shareholder value. They came up with a “Facial Attractiveness Index” of 677 CEOs from the S&P 500 companies based on their facial geometry. CEOs with a higher Facial Attractiveness Index were found to be associated with better stock returns around their first days on the job, and higher acquirer returns upon acquisition announcements. “To mitigate endogeneity concerns, we compared stock returns surrounding CEO television news events with stock returns surrounding a matched sample of news article events related to the same CEO. CEOs’ Facial Attractiveness Index positively affects the stock returns on the television news date, but not around the news article date,” according to the University of Wisconsin professors Joseph Taylor Halford and Scott HSU who conducted the study. “The findings suggest that CEO appearance matters for shareholder value and provide an explanation why more attractive CEOs receive “beauty premiums” in their compensation,” they say.

Yahoo!’s Marissa Mayer was cited by researchers as an example of an attractive chief executive who has boosted share prices, however they added that CEO attractiveness is only a small part of share performance. Since Mayer took charge of Yahoo, the company’s shares have risen by more than 150 percent. “She scored 8.45 (out of 10) in our facial attractiveness index and is among the top 5 percent in our sample,” Halford and Hsu said. Speaking to CNBC, the researchers said, “Of course, we don’t mean that all the increase in stock price is from her appearance. We just find that there might be some positive correlation between the two.”

A more surprising study, noted by The Daily Telegraph’s Josephine Fairley, is the London School of Economics (LSE) assessment of 52,000 people in the UK and US which showed that attractive men had IQs 13.6 per cent above average, while attractive women were 11.4 points higher. The study’s lead researcher, Satoshi Kanazawa, concluded, “Physical attractiveness is significantly positively associated with general intelligence.”

But according to Dr. Gordon Patzer, who’s conducted three decades of research into the subject, humans are actually hard-wired to respond more favorably to attractive people. “Good-looking men and women are generally regarded to be more talented, kind, honest and intelligent than their less attractive counterparts.” Even studies of babies show they’ll look more intently and longer at attractive faces, Dr. Patzer notes. And we can’t blame the media’s obsession with perfection for that phenomenon.

Fairley notes that elsewhere, a Tufts University study by psychologists Nicholas Rule and Nalini Ambady observed that a random sample of people could rate the competence, dominance, likeability, maturity and trustworthiness just by studying the facial photographs of CEOs. “So however inequitable all this seems, there must be something in all this.” She adds that the hypothesis conforms with the view of social psychologist Elliot Anderson, of Stanford University, that it probably all has something to do with ‘positive reinforcement:’ a person’s self-perception, boosted by healthy feedback from others, plays a role in success.

Confidence shines out from some people – and confidence is hugely attractive. People who know they look good tend to exude that confidence from every cell of their being. Fairley adds that she is herself a huge believer, “ in the power of a good ‘makeover;’ literally, anyone can feel more attractive with right make-up and haircut.”

The bias towards attraction is, according to Fairley, another form of prejudice and discrimination. “Even if the theorists are spot on, surely we can’t help wishing that people could achieve, in this world, without having to look like they’ve stepped out of the pages of a glossy? That would be nice. It would be interesting, meanwhile, to follow the fortunes of investors who built their portfolio on the strength of the attractiveness of those bosses, over the period of a year.”





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