Electronic copy available at: http://ssrn.com/abstract=1571469
A Corporate Beauty Contest
John R. Graham, Campbell R. Harvey and Manju Puri
Fuqua School of Business, Duke University, Durham, NC 27708, USA National Bureau of Economic Research, Cambridge, MA 02912, USA
We conduct beauty contest experiments, using close to 2,000 subjects to study the facialtraits of CEOs. In one experiment we use pairs of photographs and find that subjects rateCEO faces as appearing more “competent” and less “likable” than non-CEO faces.Another experiment matches CEOs from large firms against CEOs from smaller firmsand finds large-firm CEOs look more competent and likable. In a third experiment,subjects numerically rate the facial traits of CEOs. We find that executive compensationis linked to these perceived “competence” ratings. Our analysis explores these findings inmore detail and shows that the facial-trait rating can be explained by a quantitativescoring of the “maturity” or “baby-facedness” of the CEO. That is, more mature lookingCEOs are assigned higher “competence” scores. This finding is potentially worrisomebecause psychology research shows that baby-faced-looking people often possessqualities opposite to those projected by their facial traits. Accordingly, we find noevidence that the firms of competent looking CEOs perform better. Essentially, the"look" of competence says very little about effective competence.