Having a famous CEO run your company can be both a blessing and a curse.
On one hand, they garner an incredible amount of media attention and free press coverage. Business journalists love to supply an eager public with stories of visionary leaders pulling a failing company away from the brink or turning an industry on its head with new innovations.
On the other hand, a CEO in the spotlight can cause plenty of headaches for the company they oversee—when every word is scrutinized, it’s easy to slip up and say the wrong thing, sending stock prices plunging and employees fuming.
But that’s not all: a new paper in the Academy of Management Review posits that celebrity CEOs may do their firms harm in the long-run by becoming engrained in the behaviors and ways of thinking that made them famous, blinding them to changing market and internal conditions.
Celebrity: Good for Executives, Not for Organizations
Fame in the business press isn’t all bad news—it’s actually great for CEOs and other members of top management.
Paper authors Jeffery B Lovelace (University of Virginia), Jonathan Bundy (Arizona State University), Donald C. Hambrick (Penn State), and Timothy G. Pollock (Penn State and University of Tennessee – Knoxville) point to previous research that shows fame comes with some serious benefits. CEOs with high amounts of media attention typically receive big boosts in compensation, protection from being fired by boards, and are often invited to join the boards of other organizations. Other members of top management fare well too, as they also receive higher pay and better chances of CEO job offers themselves.
That’s great for leaders, but maybe not so great for the organization as a whole. A small number of studies have shown that in the years following a CEO winning major media awards, companies experienced negative performance trends.
Why is that? Lovelace and his colleagues set out to learn, and in the process, they identified four types of celebrity CEO archetypes.
The Four Kinds of Celebrity CEOs
Every good story needs a good character, and characters are easier to relate to when they fall into specific archetypes. A celebrity CEO, whose story is brought to the masses by business journalists, is no different. Though they may not fit neatly into a category, Lovelace and his coauthors state that media coverage often places CEOs into these categories to make the story easier to digest:
“Just as movies, novels, and wines must fit into distinct genres to receive acclaim, so, too, must journalists’ portrayals of CEOs follow familiar story lines.”
A creator CEO does just that—they’re creating new businesses and products. They’re the startup entrepreneurs, the innovative tech minds, and scrappy builders. They are, perhaps, the most beloved by the media in our current moment. Examples include Jeff Bezos of Amazon and Mark Zuckerberg of Facebook.
Transformers change a business’s strategy and culture to avoid future failures. Often described as “long-term thinkers, re-inventers, and change agents,” examples include Indra Nooyi of PepsiCo and Jack Welch of GE.
Another media darling, the rebel is the leader who bucks industry norms and defies conventional wisdom on their way to success. They’re often portrayed as fearless, brash, and unafraid to call their competitors to task. Examples include John Legere of T-Mobile and Brian Chesky of Airbnb.
Saviors pull old firms from certain death. Often seen as tough, and perhaps even heartless, their decisions are framed as “for the greater good.” Examples include Lee Iacocca at Chrysler and Steve Jobs in his second stint at Apple (a rare example, according to the authors, of a CEO who has been portrayed as multiple archetypes).
When Celebrity Becomes a Problem
While finding fame for your success does not guarantee future failure, the authors explain that it does tend to cause a few changes to happen in leaders. Whether these changes help or harm depends on the business climate.
Lovelace et al. outline three “sociocognitive outcomes” resulting from CEO celebrity. First, there’s the increased confidence that comes with public praise. While not automatically a bad thing, “the elevated confidence that follows from celebrity may or may not be warranted.”
Next, there’s an increased pressure to stay true to type. If the media has portrayed a CEO as a creator, that CEO is likely to feel they must maintain the trappings of a creator and “internalize these social pressures and feel constrained in their set of available actions and behaviors.”
Finally, an increased sense of authority tends to decrease thoughtful reflection and speed up decision making. The authors point out that research shows that people with perceived power and authority “tend to employ more automatic forms of information processing, largely relying on old habit and behaviors.”
Once these outcomes take place, the authors point to two behavioral outcomes: persisting with the behaviors that won them acclaim (whether harmful or not) and exaggerating type-specific behaviors. In other words, if a CEO has been cast as a rebel, they’re likely to ramp up the behaviors of a rebel CEO.
Elon Musk has provided plenty of examples of this as of late. Musk has been eager to wear the hat of the rebel CEO, and in some cases, it’s served him well. Other times, his brashness and eagerness for the spotlight cause his companies all sorts of trouble, like SEC investigations.
Damage from these behavioral changes could be inconsequential, provided that nothing in the world around them ever changes. More likely, though, is that things will change, and “the more the external and internal environments shift, the less appropriate the CEO’s entrenched paradigm becomes and the greater the potential for organizational performance to suffer.”
The authors equate these behavioral changes from celebrity CEOs to shackles—locking them into behaviors that prevent them from adapting to the changing business landscape. Entrenched bias in previous success makes it much more difficult to respond to new challenges.
Minimizing the Damage
Of course, a celebrity CEO doesn’t spell certain doom. There are certain factors the authors point to as mitigating the behavioral changes brought on by the spotlight. The intensity of each archetype, the CEOs natural level of narcissism, and how long they remain in the spotlight all affect these outcomes in some way.
The authors also suggest giving the board greater independence and authority to minimize the effects of celebrity, as well as utilizing incentive structures that counter some of the negative behaviors associated with it, like restricted stock for savior types to prevent overzealous cost-cutting.
Of course, a major source of change must come from leaders themselves. Being aware of your biases and blind spots is one of the most powerful traits a strong leader can possess. Lovelace and team put it best:
“For celebrity CEOs who are capable of detached introspection, we encourage ongoing alertness that acclaim is a double-edged sword.”