A comprehensive study exploring the nexus between personality traits and executive compensation has revealed that CEOs exhibiting stronger Machiavellian tendencies—defined by a drive to advance personal objectives and dominate social interactions—are statistically more likely to command higher overall remuneration. This includes their standard pay packages and severance agreements and the compensation levels of those in their immediate leadership circle.
The research, led by Dr Aaron Hill, Associate Professor at the Warrington College of Business at the University of Florida, found that CEOs with elevated Machiavellian traits demonstrated superior motivation and effectiveness in negotiating compensation. According to Hill and his co-authors, these executives are especially adept at securing advantageous financial arrangements for themselves and members of their top management teams.
The researchers employed a longitudinal dataset encompassing firms listed in the S&P 500 index to arrive at these findings. They meticulously analysed compensation data in conjunction with personality assessments conducted by expert clinical psychologists, who evaluated publicly available video recordings of the executives in question. This methodological approach allowed the team to link observable behavioural patterns with quantifiable compensation outcomes over time.
“Our broad findings indicate that Machiavellianism in CEOs is positively associated with several key aspects of executive pay,” said Hill. “This includes their own salaries, severance packages, and notably, the compensation of their C-suite peers. What is particularly striking is that the increases in top management team pay often precede subsequent increases in CEO pay, suggesting a strategic use of influence to create favourable precedents for their own compensation.”
The study illuminates a subtle but significant bias in how certain personality traits, particularly those associated with strategic manipulation and self-interest, can shape corporate remuneration decisions. This dynamic raises essential questions about the systems and incentives that govern executive pay. Hill and his colleagues suggest that boards of directors—typically responsible for approving compensation—should be more active in ensuring that reward structures align with the behaviours and values they wish to see in leadership.
“Everyone has personality traits that come with trade-offs—some qualities can be strengths in one context and weaknesses in another,” Hill noted. “The key for boards and decision-makers is to create environments that amplify the constructive dimensions of these traits while minimising their potential for harm. In doing so, they can foster leadership cultures that reward performance without succumbing to manipulative or self-serving behaviour.”
Ultimately, the research offers a nuanced look at how individual psychology intersects with organisational governance. It raises awareness of the potential for personality-driven distortions in executive compensation. It encourages more intentional oversight to ensure leadership reward systems serve organisational goals and stakeholder interests.
More information: Aaron Hill et al, Chief executive officer (CEO) Machiavellianism and executive pay, Journal of Applied Psychology. DOI: 10.1037/apl0001290
Journal information: Journal of Applied Psychology Provided by University of Florida