The three personality disorders of failed CEOs

06 November 2017 -

Often, the traits that lead us to success can also lead us to failure

Guest blogger Adrian Furnham

Since the crash of 2008/09 CEO salaries and performance has been more under the spotlight. Prime Minister Theresa May has also signalled her interest in “fat cat” bosses greed and hubris. There have been two crucial questions in this area

First, is how much they are paid in comparison with others in the organisation. Second, whether these salaries are in any way related to performance, however measured and defined.

What has not surprised many people is that so many CEOs, who have been very highly remunerated were actually very poor performers. They presided over massive drops in share price, the most talented people leaving for “the opposition” and organisation change initiative failures on a grand scale.

There are a number in prison, mainly for fraud. It has been suggested that they had a toxic mix of arrogance, greed and general incompetence.

The American based Institute for Policy Studies who publish annual “Executive Excess” reports (based on 241 CEOs in the 25 highest paying jobs over 25 years) called Bailed Out, Booted and Busted found that 22% had been Bailed Out (ceased to exist or received taxpayer bailouts), 8% were sacked (lost their jobs involuntarily) and 8% Busted (paying significant fines or settlements).

In other words 38% were seriously poor performers.

The report is more concerned with legal reforms (CEO-worker pay ratio disclosure; pay restrictions on certain executives; limiting the deductibility of executive function) as well as establishing principles for better systems that prevent this happening

They noted that many CEOs had “delivered” for the shareholders but by dubious means: manipulating market-place monopolies, freezing worker’s pay or cutting corners on environmental protection.

They described in some detail who, when and how these CEOs had derailed and caused their company significant problems.

The study documented the capricious, callous and cocky style of chief executives whose greed appeared to know no bounds. It is more a business report than one that tries to uncover the motives or psychological processes associated with the executives.

Studies on derailed bosses often identify a toxic triad of characteristics: arrogance, callousness and theatricality.

They are also concerned with the most obvious question in trying to prevent this happening again: how and why were they appointed in the first place? Were perhaps the very characteristics that played such an important role in their down fall also responsible, in part, for them climbing the greasy pole of corporate life?

The psychological literature on leadership derailment and failing leadership borrows many ideas from psychiatry and psychoanalysis.

Seventy-five years ago the German born Freudian Karen Horney argued that children develop three normal and spontaneous patterns of relating to others.  The three trends have been labelled moving away from others, moving against others, and moving toward others.

The moving away trend consists of coping mechanisms characterised by isolation and pulling away from others to avoid situations that provoke basic anxiety.

The moving against trend has a basic hostility and mistrustfulness at its centre. People, she argued, characterised by this trend cope with their basic anxiety by seeking power and control over others.

The third trend of moving toward others is characterised by inhibition of own needs to appease others at almost any cost. Horney’s theory explains why individuals consistently act in accordance with the derailment tendencies, even when it has obvious negative consequences.

The psychiatric literature on the personality disorders has a similar three-fold classification. It is in Cluster B, labelled dramatic, emotional and erratic, that the clue lies. It uses different language and terms but the processes under the toxic triad are explained.

The first is callousness: cold, manipulative, un-empathic and, most interesting of all, guilt free. Many aspiring CEOs rejoice in their tough image: a person who “kicks arse”, get things done and isn’t swayed by sentimentality.

Many shareholders warm to the idea of a no-nonsense boss happy to take-on the many “people problems” in the organisation.

The second is arrogance: hubristic, self-centred, pompous. We all want in our leader self-confidence and a person “comfortable” in their own skin. We admire people with self-belief who is no held back by self-doubt and dithering.

The third is theatricality: varying expressions of emotionality, dramatic, show offs. The media likes the expression of passion; the boss who can appear totally committed to their business.

They also like quirky expressions of special clothes and personal styles.

The data suggest that these three characteristics, in moderation, are extremely helpful in a business career. Of course, one needs to be bright, hard-working, ambitious etc, but these three characteristics give one a boost.

Indeed, there are studies from Britain, Denmark and New Zealand, all of which correlate with these ideas.

The story goes like this. If an executive has an optimal amount of these factors often called tough, self-confident and passionate, they can be rewarded by success. We learn little from success except to keep doing what we did. Failure is a good teacher.

So being promoted and being initially successful tends to push the potentially derailing executive over the limit where confidence turns into narcissism; toughness into psychopathy and theatricality into hysteria.

Nothing exceeds like excess.