Facial Attractiveness and CEO Compensation: Evidence from the Banking Industry

74 Pages Posted: 28 Jan 2021 Last revised: 8 Nov 2022

See all articles by Shaker Ahmed

Shaker Ahmed

University of Vaasa

Mikko Ranta

University of Vaasa

Emilia Vähämaa

Hanken School of Economics

Sami Vähämaa

University of Vaasa

Date Written: September 12, 2022

Abstract

This paper examines the effect of facial attractiveness on the compensation of bank Chief Executive Officers (CEOs). Consistent with the so-called beauty premium hypothesis, we document that good looks pay off for bank CEOs. Specifically, by utilizing machine learning to assess the facial appearance of the CEOs of large U.S. banks, we find that CEO facial attractiveness is positively associated with the annual total compensation and the discretionary, performance-based components of compensation. The total compensation of above-average looking bank CEOs is about 24 percent higher than the compensation of CEOs with below-average looks after controlling for various CEO-specific and bank-specific attributes that are known to affect executive compensation. Furthermore, our results indicate that facial attractiveness is weakly positively related to the annual base salary while being unrelated to the pay-performance and pay-risk sensitivities of bank CEO compensation. Overall, our empirical findings provide strong evidence for the existence of a beauty premium in the executive labor market.

Keywords: Facial attractiveness, CEO compensation, beauty premium, bank CEOs

JEL Classification: G01, G21, G30, G32

Suggested Citation

Ahmed, Shaker and Ranta, Mikko and Vähämaa, Emilia and Vähämaa, Sami, Facial Attractiveness and CEO Compensation: Evidence from the Banking Industry (September 12, 2022). Journal of Economics and Business, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3744808 or http://dx.doi.org/10.2139/ssrn.3744808

Shaker Ahmed

University of Vaasa ( email )

P.O. Box 700
Wolffintie 34
FIN-65101 Vaasa, FI-65101
Finland

Mikko Ranta

University of Vaasa ( email )

P.O. Box 700
FIN-65101 Vaasa, FI-65101
Finland

Emilia Vähämaa

Hanken School of Economics ( email )

PB 287
Helsinki, Vaasa 65101
Finland

Sami Vähämaa (Contact Author)

University of Vaasa ( email )

P.O. Box 700
Vaasa, FI-65101
Finland
+358 29 449 8455 (Phone)

HOME PAGE: http://www.uwasa.fi/~sami

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