What is (s)he Worth? Exploring Mechanisms and Boundary Conditions of the Relationship Between CEO Extraversion and Pay

Abstract

Integrating human capital theories and the status incongruity hypothesis at the upper echelons, we examine for whom extraversion, the personality trait that has been most strongly and consistently implicated in leader success, influences Chief Executive Officer (CEO) pay. To assess the personality traits of CEOs, we used a computerized text analysis approach on the language spoken by CEOs in conference calls. Using a sample of firms listed on the S&P 1500, we find that more extraverted CEOs earned higher pay, indicating that this was a trait valued by boards. Additionally, this relationship was due to enhanced firm performance; specifically, market performance. However, a critical boundary condition is that the relationship between CEO extraversion and pay was weaker for female (vs. male) CEOs, despite the market responding equally positively to extraverted female and male CEOs. Thus, the monetary benefits of higher levels of extraversion did not extend to female CEOs and likely reflects backlash. Supplemental analyses revealed that this devaluation of more extraverted female (vs. male) CEOs was mitigated when the CEO was also the chairperson of the board (i.e., CEO duality) or under conditions of greater female representation on the board of directors.

A vicious cycle of symbolic tokenism: The gendered effects of external board memberships on chief executive officer compensation

“…Second, our results challenge one of tokenism theory's key tenet that better outcomes result when minority groups gain representation, revealing that that greater female representation on boards can sometimes be related to greater gender‐based disparities. Our findings stand in contrast to prior research, which tends to find that greater female representation on the board is generally related to less gender bias in organizations (e.g., Abebe & Dadanlar, 2019), including toward female CEOs (e.g., Malhotra et al, 2020; Oliver et al, 2018). Even when prior work has found that greater female representation on the board was insufficient to engender positive or desired outcomes (e.g., Cook et al, 2019), it generally does not find it to be harmful for equality.…”

“…We speculate that one possible explanation for this negative relationship could be because being a member of a greater number of external boards could be seen as a power‐seeking behavior, and a perceived desire for power tends to be punished in women, but not in men (e.g., Okimoto & Brescoll, 2010). Thus, beyond viewing these social connections as not as useful and valuable as those held by male CEOs, female CEOs may be further penalized by boards and compensation committees for being “power hungry.” Such an effect would be in line with the status incongruity hypothesis (Rudman & Phelan, 2008) and emerging evidence that boards can be negatively affected by gender stereotypes when determining the compensation of female CEOs (Malhotra et al, 2020).…”

“…CEOs may be further penalized by boards and compensation committees for being "power hungry." Such an effect would be in line with the status incongruity hypothesis (Rudman & Phelan, 2008) and emerging evidence that boards can be negatively affected by gender stereotypes when determining the compensation of female CEOs (Malhotra et al, 2020).…”

“…Recent research suggests that male and female CEOs generally receive comparable levels of compensation (e.g., Bugeja, Matolcsy, & Spiropoulos, 2012; Gupta, Mortal, & Guo, 2018). However, female CEOs who are more extraverted receive lower pay than similarly extraverted male CEOs (Malhotra, Shen, & Zhu, 2020), which appears to occur because extraverted female CEOs violate prescriptive gender stereotypes that women should not be agentic or dominant. This devaluation of more extraverted female CEOs is observed despite the fact that CEO extraversion is positively related to firm market performance—for both male and female CEOs.…”

Does a gender pay gap exist on executive boards? An empirical multilevel analysis of executive board compensation in German listed companies

“…4.1). The low representation and the unadjusted pay gap suggest that women continue to experience lower board acceptance and are inhibited by the glass ceiling (Bertrand and Hallock 2001;Hendrix 2011;Malhotra et al 2021). Based on human capital theory, compensation research argues that lower pay is attributable to lower human capital (e.g., educational background and work experience).…”