Do CEO IQs Matter as Much as Looks?

[cnxvideo id=”655424″ placement=”ros”]Is it better for the CEO of a company to be smart or to look smart? Is there such a thing as too smart or too pretty? Does it matter?

Maybe this will help clarify the reason this is important: CEOs earned an average of $15.5 million in 2015 (or 276 times the average worker’s pay). Average worker pay is up 10.3% since 1978 while CEO pay is up 941%.

Are CEOs smarter or just better looking than the average employee? It’s hard to imagine that they’re 276 times smarter or better looking. So, what’s up?

Some studies have suggested that very high IQ scores can present a problem in high-level management. CEO’s with very high IQs can be poor listeners and may even become resentful of needing to explain  their decisions to their staffs. One study, cited by the Korn Ferry Institute, even suggests that “very often the very intelligent executive is markedly ineffective.” High IQ executives often tend to be impatient, need to be right all the time, and “refuse to leave room for others to be smart as well.”

[nativounit]

Whether a CEO with a high IQ is a good leader or not is often a function of the CEO’s self-awareness. Korn Ferry’s research indicates that executives with high self-awareness understand the effects of their behavior on others and are able to adjust their behavior as necessary. Here’s the conclusion:

High IQ improves executive performance for those with elevated levels of self-awareness. For those whose self-awareness is low, increased IQ becomes a liability and detriment to managerial performance.

Self-awareness, more than IQ, “shows an unqualified positive relationship with performance.”

But are self-awareness and IQ more important than looks? A study by researchers at Duke University published last year in the journal “Management Science” found that a “look of competence” is more important than beauty in the selection and compensation of a CEO.

Particularly interesting is the effect of that competent look on a CEO’s compensation. From the study’s abstract:

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.

No evidence that higher pay is associated with superior performance? And there is no evidence that a competent-looking CEO makes better business decisions either. That is certainly worth $15.5 million a year.

[wallst_email_signup]