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LEADER SHI P | 1/04/2014 @ 2:51PM | 1,702 views
Not Just a Pretty Face: WhyCEOs Don't Need a FacialAttractiveness Index
Chief executives have a lot on their plate. Rapid globalisation, the
transformative powers of the internet and the increasing requirement to be on
top of risk management and corporate sustainability agendas are making the
job more complex.
Now there’s a new worry. Where do our CEO’s rank in the Facial
Attractiveness Index?
FATTI, as it will no doubt be nicknamed, has been dreamt up by academics
Joseph T Halford and Hung-Chia Hsu at the University of Wisconsin.
It tests the hypothesis that the physical appearance of CEOs has a measurable
effect on the returns investors can enjoy by investing in their companies’
shares. And its conclusion is that this is indeed the case.
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I interview chief executives about business, life & leadership.
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Halford and Hsu’s report, entitled Beauty is Wealth:
CEO Appearance and Shareholder Value, uses
“facial geometry” to place into FATTI 677 CEOs
from companies in the S&P500 index between 2000
and 2012.
Comparing share price reaction to television and
press exposure coverage of news announcements by
the chosen CEOs, the study finds that chief
executives with a higher FATTI rating are associated
with better stock returns around their first days in
the job than facially-challenged peers. They also
apparently deliver better share price reactions when
announcing acquisitions.
It concludes that the findings “suggest that CEO
appearance matters for shareholder value and
provide an explanation why more attractive CEOs
receive ‘beauty premiums’ in their compensation”.
“Overall, our findings suggest that more attractive
CEOs receive higher compensation for a reason,”
the report states. “They create value for
shareholders through better negotiating power and
visibility.”
Halford and Hsu’s research provides counter
evidence to the findings of “A Corporate Beauty
Contest,” a 2010 study by John R Graham, Campbell R Harvey and Manju
Puri, academics at North Carolina’s Duke University.
They conducted “beauty contest experiments” among nearly 2,000 people and
found that overall they rated CEO faces as “appearing more competent” than
faces of people who were not chief executives.
Their work also found that CEOs at large companies were judged to look more
competent that those running smaller companies.
However, Graham, Harvey and Puri concluded that, although more attractive
CEOs receive higher compensation, it was not clear that companies with
competent-looking CEOs achieve better performance in terms of returns on
assets.
In these times of political correctness, it is discouraging, though perhaps not
surprising, that instinctive responses to a pretty face colour financial
investments.
The question is where all this takes us. For Marissa Mayer, the Yahoo
YHOO -0.47% ! chief executive given a 8.45-out-of-ten FATTI rating in the Halford
and Hsu rankings, it is no doubt an unwanted distraction, following her
encounter at last summer’s annual meeting with a shareholder who told her:
“I’m Greek. I’m a dirty old man and you look attractive”.
that as Business Editor of The Oxford Mail and
Times. Freelance for the past nine y ears, I
specialise in interv iews with chief executives
and other major business figures. Chairmen and
CEOs interv iewed include Larry Ellison of
Oracle, John Chambers of Cisco Sy stems, Jeff
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