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Why Do Some CEOs Get Paid So Much?

“We all know that executive pay in America has exploded during the past two decades. The CEOs of major companies once made 30 or 40 times the average employee salary. But now the nation’s highest-paid execs make hundreds of times what most nine-to-fivers make,” according to the Motley Fool.

But even more interesting is the reason some CEOs are paid so much more than others.

Research by Stanford GSB’s Charles A. O’Reilly shows that it is the persuasive personality and aggressive “me first” attitude embodied by narcissistic CEOs that helps them land bloated pay packages.

Specifically, narcissistic CEOs are paid more than their non-narcissistic (and merely self-confident) peers. There is also a larger gap between narcissists’ compensation and that of their top management teams than is found with CEOs who do not display the trait. The longer the narcissists have held the top post, the bigger the differential, according to the study published in The Leadership Quarterly last year.

Narcissism is a personality type characterized by dominance, self-confidence, a sense of entitlement, grandiosity, and low empathy. Narcissists naturally emerge as leaders because they embody prototypical leadership qualities such as energy, self-assuredness, and charisma.

Said O’Reilly: “They don’t really care what other people think and, depending on the nature of the narcissist, they are impulsive and manipulative.”

“The scholars chose to focus on the quickly changing, high-stakes technology industry, in part because it prizes individuals who are convinced of their own vision and who are willing to take risks. They figured correctly that it would bolster narcissists with large pay contracts.

Said O’Reilly: “In places like Silicon Valley, where grandiosity is rewarded, we almost select for these people. We want people who want to remake the world in their images.”

“Narcissistic CEOs secure these pay contracts, at least in part, by winning over board members. The study found that companies with highly narcissistic top bosses do not necessarily perform better than those led by less narcissistic chiefs.Narcissistic CEO/founders obtained even larger compensation than their narcissistic peers who didn’t found their companies. O’Reilly says this is logical given the extreme self-confidence and persistence of founders, who have to raise capital and overcome obstacles in order to survive.”