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A Corporate Beauty Contest

26 Pages Posted: 15 Mar 2010 Last revised: 29 Mar 2016

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Manju Puri

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Multiple version iconThere are 2 versions of this paper

Date Written: July 8, 2015

Abstract

We provide new evidence that the subjective “look of competence” rather than beauty is important for CEO selection and compensation. Our experiments, studying the facial traits of CEOs using nearly 2,000 subjects, link facial characteristics to both CEO compensation and performance. In one experiment, we use pairs of photographs and find that subjects rate CEO faces as appearing more “competent” than non-CEO faces. Another experiment matches CEOs from large firms against CEOs from smaller firms and finds large-firm CEOs look more competent. In a third experiment, subjects numerically score the facial traits of CEOs. We find competent looks are priced into CEO compensation, more so than attractiveness. Our evidence suggests this premium has a behavioral origin. First, we find no evidence that the premium is associated with superior performance. Second, we separately analyze inside and outside CEO hires and find that the competence compensation premium is driven by outside hires – the situation where first impressions are likely to be more important.

Keywords: First impressions, thin slicing, CEO selection, competence, likeable, trustworthy, attractive, facial traits, CEO compensation, CEO performance, behavioral economics, behavioral finance

JEL Classification: G34, J31

Suggested Citation

Graham, John R. and Harvey, Campbell R. and Puri, Manju, A Corporate Beauty Contest (July 8, 2015). Duke I&E Research Paper No. 16-10. Available at SSRN: https://ssrn.com/abstract=1571469 or http://dx.doi.org/10.2139/ssrn.1571469

John Robert Graham

Duke University ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Campbell R. Harvey

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Manju Puri (Contact Author)

Duke University - Fuqua School of Business ( email )

1 Towerview Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-7657 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative

215 Morris St., Suite 300
Durham, NC 27701
United States

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