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Are CEOs Born Leaders? Lessons from Traits of a Million Individuals

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Our study combines a near-exhaustive sample of CEOs of Swedish companies with data on their cognitive and non-cognitive ability and height at age 18. Although CEOs, and large-company CEOs in particular, have better traits than the population on average, they are neither exceptional in any of the traits nor their combination. Large-company CEOs belong to the top 5% of the population in their traits, but to top 0.2% in pay. The mismatch between the moderately high trait values and the exceptionally high pay explains why less than a quarter of the CEO pay premium over the population can be attributed to the traits.

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  • Keloharju, Matti & Knüpfer, Samuli, 2014. "Are CEOs Born Leaders? Lessons from Traits of a Million Individuals," Working Paper Series 1024, Research Institute of Industrial Economics, revised 16 Apr 2015.
  • Handle: RePEc:hhs:iuiwop:1024
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    3. Markus Ibert & Ron Kaniel & Stijn Van Nieuwerburgh & Roine Vestman, 2018. "Are Mutual Fund Managers Paid for Investment Skill?," Review of Financial Studies, Society for Financial Studies, vol. 31(2), pages 715-772.
    4. Thomas Breda, 2018. "Working in family firms," IZA World of Labor, Institute of Labor Economics (IZA), pages 434-434, April.
    5. Efing, Matthias & Hau, Harald & Kampkötter, Patrick & Steinbrecher, Johannes, 2015. "Incentive pay and bank risk-taking: Evidence from Austrian, German, and Swiss banks," Journal of International Economics, Elsevier, vol. 96(S1), pages 123-140.
    6. Fan, Yaoyao & Jiang, Yuxiang & Zhang, Xuezhi & Zhou, Yue, 2019. "Women on boards and bank earnings management: From zero to hero," Journal of Banking & Finance, Elsevier, vol. 107(C), pages 1-1.
    7. Limbach, Peter & Sonnenburg, Florian, 2014. "CEO fitness and firm value," CFR Working Papers 14-12 [rev.], University of Cologne, Centre for Financial Research (CFR).
    8. Keluoharju, Matti & Knüpfer, Samuli & Tåg, Joacim, 2016. "What Prevents Women from Reaching the Top?," Working Paper Series 1111, Research Institute of Industrial Economics, revised 07 Mar 2019.
    9. Baghai, Ramin P. & Silva, Rui C & Thell, Viktor & Vig, Vikrant, 2020. "Talent in Distressed Firms: Investigating the Labor Costs of Financial Distress," CEPR Discussion Papers 14383, C.E.P.R. Discussion Papers.
    10. Shu Han & S. Abraham Ravid, 2020. "Star Turnover and the Value of Human Capital—Evidence from Broadway Shows," Management Science, INFORMS, vol. 66(2), pages 958-978, February.
    11. Keloharju, Matti & Knüpfer, Samuli & Tåg, Joacim, 2020. "CEO Health and Corporate Governance," Working Paper Series 1326, Research Institute of Industrial Economics, revised 20 Apr 2020.
    12. David Boto-Garcìa & Alessandro Bucciol & Luca Zarri, 2020. "Managerial Beliefs and Firm Performance: Field Evidence from Professional Elite Soccer," Working Papers 19/2020, University of Verona, Department of Economics.
    13. Farago, Adam & Holmén, Martin & Holzmeister, Felix & Kirchler, Michael & Razen, Michael, 2019. "Cognitive Skills and Economic Preferences in the Fund Industry," OSF Preprints 964ba, Center for Open Science.

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    More about this item

    Keywords

    CEO; Cognitive ability; Non-cognitive ability; Height; Compensation; Firm size;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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