Would it be useful to study Psychopaths at the Stock Exchange?
Well maybe, given the chaos in the financial services sector since 2008, Lehman Brothers, Royal Bank of Scotland and many more.
The size of the damage done is incalculable and the financial tab picked up by governments unprecedented, so is there a case for corporate business and state financial murder? Well, we know that there is a case that, had auditors and regulators done their job properly many CEO’s and Chairmen from this sector would now be in prison.
Let’s say you are the Chairman of one of the largest financial institutes in the world with assets of $638 billion and you need to employ a new Chief Executive. Your number one candidate seems to have all the requisite skills, is charming, smart and has all of the right answers to your questions, problem solved – right? Hang on though wouldn’t you want to know if you were about to employ a Psychopath. Well there are many examples out there of this having happened and is still happening.
We would like to believe that if we met someone who was completely without conscience and someone who was capable of doing anything in order to serve their purpose or to get them what they wanted, you could spot it.
In popular imagery of the psychopath we think of the likes of Hannibal Lecter or the Moors Murderers but in reality many psychopaths just want money, power, fame or a nice car.
Psychopaths – Narcissists or Sociopaths – lets just summarize the differences.
Narcissism is a DISORDER of SELF-ESTEEM, the two triggers being SHAME and GUILT !!!!!
Psychopaths DON’T FEEL and they are BORN that way.
Sociopaths are the SAME AS PSYCHOPATHS the difference is they ARE MADE not BORN that way!!
Narcissism is clinically defined as having up to 9 CHARACTERISTICS and everyone has 1 or 2, however if you are diagnosed as having more than 5 you are classified as having a PERSONALITY DISORDER.
If you are interested in Corporate Psychopaths, we can recommend the book “Snakes in Suits – WHEN PSYCOPATHS GO TO WORK” the authors Paul Babiak, Ph.D. and Robert D. Hare, Ph.D. are both researchers who have studied psychopaths. Hare, the author of ‘Without Conscience’ is a World renowned expert on psychopathy and Babiak is an industrial-organisational psychologist. Recently, the two came together to study how psychopaths operate in corporations, and the results were surprising. They found it was exactly the modern, flexible, open, corporate World, in which high risks can be equal to high profits, that attracts psychopaths. They may enter as rising stars or corporate heroes and saviours, but all too soon they are abusing the trust of colleagues, manipulating supervisors and leaving the workplace in a shambles.
Egomania is a term we are all familiar with but Narcistic Personality Disorder (NPD) may be less well known. Everyone has an ego and a successful healthy ego is the hallmark of a healthy individual, but what happens when an ego goes too far? When can someone really be called an egomaniac?
Lacks empathy: is unwilling [or, we would add, unable] to recognize or identify with the feelings and needs of others.
Shows arrogant, haughty [rude and abusive] behaviour attitudes.
Often Egomania is synonymous with psychopathy and where better to stretch your wings and test out your power as a psychopath than in the corporate world.
We all require some Narcism, it’s the element of our personality that provides drive and success, but what is normal and what is excessive? There are nine characteristics associated with NPD and in order to be classified as having a personality disorder you need five or more from the above list.
Pathological narcissism is a life-long pattern of traits and behaviours which signify infatuation and obsession with one’s self to the exclusion of all others and the egotistic and ruthless pursuit of one’s gratification, dominance and ambition.
Highly narcissistic CEOs are much less responsive to recent objective measures of their performance than less narcissistic CEOs. They found the narcissists would continue to make lots of acquisitions as high premiums, even when their company hadn’t been doing well, whereas the less narcissistic CEOs would get more conservative in the face of bad recent results.
Most interesting though, they found that highly narcissistic CEOs were very responsive to social praise (measured as media praise and media awards) and this would spur them on to increase their pace of acquisitions and premiums paid (which, over time, tended to destroy shareholder value). Less narcissistic CEOs were much less responsive to social praise. In other words, that praise didn’t cause them to feel confident enough to go out on a buying spree for companies.
The study showed that more narcissistic CEOs spent more on advertising as a percentage of their sales, spent more on R&D as a percentage of their sales, ran up costs more (measured as SG&A as percentage of sales), and took on more debt.
More narcissistic CEOs also tended to do more acquisitions and pay much higher premiums for the companies they bought.
More narcissistic CEOs led companies that had more extreme performance results – sometimes they’d do well and other times they’d do terribly.
They also found more narcissistic CEOs were linked to big performance fluctuations for the companies – for a few years they would do really well but this would usually be followed by several years where they did very poorly.
Optimism is healthy. Arrogance is not.
Self-confidence is healthy. Megalomania is not.
Believing that you can do a great job as CEO is healthy. Thinking that you know better than others is not.
You need confidence and conviction to succeed as a CEO or in life, but what studies clearly show is that, taken to extremes, narcissism kills companies and kills CEO careers.
We can all understand why many CEOs go too far in their self-confidence. Throughout their whole careers, they’ve been rewarded for taking risks and showing self-confidence. It’s like they keep betting on red and winning 11 times in a row. What are you going to do on the 12th time? Bet red and be more confident than ever. But it’s the CEOs who can keep their heads and a sense of perspective who, in the long-run and over thousands of cases and not just one or two special cases, tend to be most successful.
In short, keep your feet on the ground while you keep reaching for the stars.
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