Good looking CEOs

Sometimes, life is really unfair. Just look at attractive people (of which I am not one). They are judged more positively and treated preferentially in all aspects of life – whether by people who don’t know them or people who are intimately familiar with their flaws and their character. In a professional setting this means that attractive people are more likely to be promoted, get a raise or a higher salary to begin with.

This preferential treatment of attractive people goes all the way to the top. Joseph Halford and Hung-Chia Hsu measured the facial attractiveness of 667 CEOs of companies in the S&P 500. Then they looked at the share price reaction to CEO appointments and of M&A announcements and compared the share price reaction to these announcements with respect to a whole range of factors. Correcting for a whole battery of factors that are known to influence CEO announcements and M&A deals, they found that in the ten trading days around a CEO appointment, the share price of the company increased by an additional 1.18% for a 10% increase in facial attractiveness. After three months the performance difference was still there and had grown to 1.9%.

Increase in share price reaction for a 10% increase in facial attractiveness

Source: Halford and Hsu (2020).

But it gets better. They also measured the share price return around earnings announcements and press interviews. There, they could differentiate between TV appearances and newspaper articles, and when a company announced its earnings, they could measure the difference between announcements that showed a picture of the CEO and those that didn’t. In the case of a TV interview, the share price of a company with an attractive CEO jumped an additional 0.44% for every 10% increase in facial attractiveness compared to a day with a newspaper interview. An earnings announcement that was accompanied by a photo of the CEO pushed share prices by 0.4% compared to an earnings announcement without a photo.

Note, though, that this entire study is based solely on male CEOs. It doesn’t say anything about female CEOs where the effect could well be negative, since attractive women are often judged by male observers to be less competent. So, it isn’t likely to be a good strategy to appoint Kate Moss as your next CEO. Though Brad Pitt might work…

Imagine the share price of Amazon if this guy was better-looking