Baby-Face Your CEO
We conduct beauty contest experiments, using close to 2,000 subjects. … We use pairs of photographs and find that subjects rate CEO faces as appearing more “competent” and less “likable” than non-CEO faces. Another experiment matches CEOs from large firms against CEOs from smaller firms and finds large-firm CEOs look more competent and likable. …We find that executive compensation is linked to these perceived “competence” ratings. … [This] can be explained by a quantitative scoring of the “maturity” or “baby-facedness” of the CEO. That is, more mature looking CEOs are assigned higher “competence” scores. … We find no evidence that the firms of competent looking CEOs perform better. (more)
So to get a CEO that costs less but is just as effective, pick one that looks “baby-faced.” Now that this news is out, do we expect such great deals to quickly disappear? I don’t – since we limit hostile takeovers, boards face only weak pressures to make firms efficient. So most boards prefer to pick a CEO that seems competent, over one who is competent.