Overcoming Bias

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Baby-Face Your CEO

www.overcomingbias.com

Baby-Face Your CEO

Robin Hanson
Apr 22, 2010
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Baby-Face Your CEO

www.overcomingbias.com

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.

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Baby-Face Your CEO

www.overcomingbias.com
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