Jan 7, 2014, 11:09 AM
What it really takes to get ahead: FAI
Economists and social psychologists and statisticians, oh my. All those tiger moms
out there trying to teach calculus to their 8th graders have got it all wrong. Their money would better be spent on plastic surgery. Guess what? People are shallow.
Never Mind the Résumé. How Hot Is the C.E.O.?
BY ANDREW ROSS SORKIN
Call it the “C.E.O. beauty premium.”
Two economists say their study shows that investors assign higher share values to companies run by attractive chief executives, that these chiefs are paid more than less-appealing counterparts and that the better looking the C.E.O.’s, the better they are at undertaking financially successful deals.
The conclusion of the unusual academic study — a sort of corporate version of “Hot or Not” — is that shareholders are as easily swayed by the glint in the eye of a chief executive as they are by a company’s actual numbers, at least in the short term.
According to a working paper by Joseph T. Halford and Hung-Chia Hsu at the University of Wisconsin, a good-looking C.E.O.’s appearance had “a positive and significant impact on stock returns surrounding the first day when the C.E.O. is on the job,” worth about 43 basis points in increased stock value compared with a C.E.O. 10 percent less attractive. A one-point increase in attractiveness on a scale of 1 to 10, the study also found, “is related to a $873,000 increase in total wage, controlling for various firm and C.E.O. characteristics.”
If you’re wondering who judges this executive beauty pageant, it is a computer.
Mr. Halford and Mr. Hsu loaded the pictures of 677 chief executives onto a website called anaface.com, which measures what it describes as “neoclassical beauty” by looking at the symmetry of a face — “the ratio of nose to ear length, the ratio of eye width compared to inner-ocular distance, the ratio of nose width to face width, the ratio of face width to face height, and the ratio of mouth width to nose width.”
Marissa Mayer, the chief executive of Yahoo, among the top 5 percent of attractive executives, according to the study, scored an 8.45 out of 10 on the Facial Attractiveness Index, or F.A.I. Paul Jacobs, chairman of Qualcomm, scored an 8.19. In comparison, the actress Angelina Jolie scored about 8.5, the economists said. Her significant other, the actor Brad Pitt, scored an 8.46. (It’s worth noting that the average score was no different between male and female chief executives.)
There is a long list of psychology research demonstrating that appearances matter more than most us would care to admit. As shallow as it may be, better-looking people have been shown in various studies to have higher self-esteem and more charisma, are considered more trustworthy and are better negotiators.
What's your FAI?