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 Executive Leadership: CEOs, Top Management Teams, and Organizational-Level

Outcomes

Nathan J. Hiller

Marie-Michèle Beauchesne

Florida International University

Chapter in The Oxford Handbook of Leadership and Organizations

Print Publication Date: May 2014

Online Publication Date: December 2013

DOI: 10.1093/oxfordhb/9780199755615.013.028

Citation:

Hiller, N. J., & Beauchesne, M. M. (2014). Executive Leadership: CEOs, Top Management

Teams, and Organizational-Level Outcomes, In David V. Day (Ed.), The Oxford

Handbook of Leadership and Organizations (Chapter 30). New York, NY: Oxford

University Press.
Executive Leadership: CEOs, Top Management Teams, and

Organizational-Level Outcomes

Nathan J. Hiller, Marie-Michèle Beauchesne

Abstract: This chapter provides an overview of the topic of leadership in the executive

context—emphasizing research from the Upper Echelons perspective of strategic

management while also considering traditional leadership research approaches and findings.

The nature of executive leadership and the role of CEOs, top management teams, and boards

of directors in producing organizational-level strategic, culture, and performance outcomes

are each considered. The authors suggest seven methodological and conceptual possibilities

for future research that appear to hold significant promise for advancing our understanding of

the nature, mechanisms, and effects of executive leadership.

Keywords: Strategic leadership, upper echelon, top management team, CEO, organizational

performance, discretion, personality, core self-evaluation (CSE), narcissism

Much ado is made of senior organizational leaders—they are both lionized and vilified for

their personal actions, strategic pursuits, and for the success (or failure) of the organizations

they lead (Kaiser, Hogan, & Craig, 2008). Is this attention from the media, researchers,

shareholders, and organizational observers really much ado about nothing? How is leadership

enacted by senior strategic leaders, both successfully and unsuccessfully? How do the

idiosyncrasies of top executives manifest in the strategic directions and performance of

organizations? This chapter first reviews the growing body of work on the topic of senior

executive leadership, seeking to address the questions posed above. Specifically, this chapter

explores five themes: the ways that senior executive leadership is unique (and not unique)

from other manifestations of leadership, the scope (and limits) of executive impact, predictors

of executive behavior, and the various ways that executive individual differences impact
strategic action and organizational outcomes. Consideration of future research possibilities

and needs are examined in a section at the end of the chapter.

We assert that a rich path forward for systematically understanding executive

leadership is possible and present seven methodological and conceptual recommendations for

future research, including (1) measurement of executive characteristics from the perspective

of familiar others; (2) better use and sophisticated validation of proxy measures; (3) attention

to the relevance of affect, emotions, and emotional regulation; (4) more complex theorizing

and analysis of interactions and nonlinear effects; (5) reframing of top management team

research to include both team emergent states and team processes; (6) differentiating the

unique positions and roles of TMT (top management team) members and inner circles; and

(7) empirical attention to the possibility of executive leadership development. These foci

necessitate more systematic bridging of strategic management with core leadership

approaches and require drawing from (among other fields and approaches) psychology,

networks, and team process literatures.

A relatively greater amount of space in this chapter is spent discussing the nature,

outcomes, and contingencies of the CEO role as compared with other top management team

members (i.e. COO, CFO, CTO), the top management team as an entity, or boards of

directors. This is not to diminish the importance of these other actors and structures in the

leadership process, and indeed, we argue that a more nuanced examination of the top

management team, in particular, is a critical avenue for future strategic leadership research.

It is important at the outset to acknowledge that by writing a chapter on executive

leadership, we could perhaps be viewed as falling prey to the fallacy that leadership and

formal organizational position are synonymous. We make no such general claims, but in the

case of senior executives, their potential impact is so great that we believe they are a

population worthy of study under the rubric of leadership, regardless of whether a particular
individual exhibits behaviors traditionally associated with effective leadership. What is

particularly important to us is the question of whether (and how) they are effective, and how

their idiosyncrasies lead to strategic actions, wins, and missteps. We do not hold them with

high (or low) esteem simply because of their formal leadership position.

Roles, Tasks, and Functions of Executive Leadership

What does executive leadership entail? The roles, tasks, and functions associated with

leadership at the executive level have been noted and described by a number of researchers

over the past 75 years using a variety of approaches. These various research approaches have

resulted in the characterization of executive leadership in somewhat different ways, yet

although different tasks, roles, and functions are emphasized and noted by different

researchers, a general picture of the nature of executive leadership emerges when this body of

work is considered in totality. As a result, it is best to think of each of these roles, tasks and

functions described as being complementary and contributing to the total picture of the nature

of executive leadership.

The first explication of the functions of executive leadership in modern organizations

comes from Chester Barnard (1938). His description of executive leadership was

multifaceted, but at its core emphasized two major roles: (1) motivating employees to

collective effort through a common purpose, and (2) coordinating and maintaining

organizational systems. Both of these primary roles and the subordinate roles and tasks

emphasize leadership of a closed system that operates largely independently of the external

environment.

The inwardly focused emphasis of Barnard contrasts with later depictions of the

nature of executive leadership, which include consideration of the executive role vis-à-vis the

external environment. Katz and Kahn (1978) noted the importance of interfacing with the

external environment (e.g., shareholders, policy makers, competitors, potential partners,

environmental groups, and unions) as a critical executive function. Jacobs and Jaques (1987)

similarly noted the importance of the external environment and emphasized the CEO role of

ensuring adaptation of the institution with the broader environment, also known as boundary

spanning. Boundary-spanning activities are not just reactive, however, but include both

adaptation to the external environment (e.g., adapting to technological changes) and active

management and change of the external environment (e.g., making acquisition decisions or

lobbying for regulation changes).

Perhaps the most well-known examination of managerial roles was undertaken by

Mintzberg (1973), who interviewed CEOs and concluded that there are 10 principal roles,

which can be clustered into three categories: interpersonal, informational, and decision

related. These roles (figurehead, liaison, leader, monitor, disseminator, spokesman,

entrepreneur, disturbance handler, resource allocator, and negotiator) are all considered

critical for effective senior leadership, and when taken together with the descriptions of

Barnard, Katz and Kahn, and Jacobs and Jaques, paint a picture of the multifaceted nature of

executive leadership.

Describing the roles, tasks, and functions of executive leadership, however, does not

tell us how executive leadership is or is not different from leadership at other organizational

levels. Many of these executive leadership functions and roles described above are not solely

the exclusive domain of the senior-most leaders in an organization. Other nonexecutive

individuals, both formally appointed leaders and informal leaders, may at times enact many

of these roles—to varying degrees. Yet for senior executives who function at the top of an

organization’s hierarchy, the requirements and scope of leadership differ in some important

ways from lower organizational levels.

(How) Is Executive Leadership Different?

The preponderance of evidence is that, although leaders at various levels may enact roles and

functions associated with senior executives, there appear to be systematic differences in the

nature of leadership at the executive level when compared with leadership at other levels.

Based largely on the work of Zaccaro (2001), Katz and Kahn (1978), and Porter and Nohria’s

(2010) research on 135 CEOs from the New CEO Workshop at Harvard, we suggest that the

tasks and requirements of senior executive leadership are unique in five primary and

important ways.

First, senior executive leaders have a primary responsibility for setting the

organization’s overall strategy. Should the organization enter a new market? How should the

firm raise funds for a new initiative or building? These are questions that must be asked and

addressed as part of the senior executive role. A critical component to this is not only the task

of organizational-level strategy making itself, but the time horizon of the strategies. At lower

organizational levels, planning and goal setting are done with more proximal time frames.

Executive leadership, on the other hand, requires a significant amount of attention to longer-

term goals (measured in years) and actions that are tied to the long-term strategies. The

emphasis on strategy making and long-term time horizons, however, does not mean that

executive leadership is all about long-term planning and strategies—CEOs must think also in

the short term, and balance proactivity with reactivity to events as they unfold (Porter &

Nohria, 2010).

Second, executive leaders participate in significantly more boundary spanning with

the external environment and engage with a diverse set of stakeholders outside the

organization including shareholders, analysts, board members, industry groups, regulators,

politicians, and other constituencies that expect to have direct contact with the CEO. At lower

organizational levels, boundary spanning is more (or exclusively) internally focused. For

example, boundary spanning by middle-level organizational leaders primarily involves

management of the interface between their units or divisions and other units of the

organization (Zaccaro, 2001). The boundary spanning required of senior executives can be

quite difficult, and senior executives need to possess significant complexity in their

cognitions and behaviors in order to deal with the multiple and competing demands of

various parts of the organizational system (including external stakeholders) and subsystems

(Denison, Hooijberg, & Quinn, 1995; Hodgkinson & Clarke, 2007; Jaques, Clement,

Rigby,& Jacobs, 1986; Zaccaro, 2001).

Third, while leaders at other organizational levels work within organizational systems

and structures, senior executive leaders create those organizational systems and structures

(Katz & Kahn, 1978). In essence, executive leaders need to spend significant time in

“elaborating the shell” (Hackman & Wageman, 2005)—setting the conditions in motion and

launching the organizational system as well as possible so that it can be viable (see Day,

Gronn, & Salas, 2006), and making adjustments to ensure alignment with strategy when

necessary. Creating systems and structures includes the broad-based design of such features

as reporting structures and systems, the ways performance is evaluated and rewarded, the

location of work, and how different parts of the organization interface with each other.

Leaders at other organizational levels may have the ability and responsibility to design and

tweak parts of the system, but the extent and scope are typically limited.

Fourth, the influence of executive leadership has a critical indirect component to it

when compared with leadership at lower levels. For example, senior executives are typically

involved in hiring leaders at the next organizational level, who in turn are responsible for

operational leader hiring. The goals, ideals, and principles that an executive leader considers

critical for all employees can’t be closely monitored by the executive, but needs to be

disseminated to the next level down. This creates an onus on senior executives to be clear

about the overall strategic direction and vision of the organization, and to clearly articulate
expectations in the hopes that the vision and principles are successfully disseminated and

reinforced down and throughout the organization.

Fifth, and finally, executive leadership has much more of a symbolic component to it.

Instituting and using symbols both through presence, actions, words, and artifacts is critical in

order to convey meaning and help employees and other stakeholders understand principles

and ideas about the organizations values (Porter & Nohria, 2010). Beyond commonly noted

symbols such as office layout or company folklore that can be carefully (or haphazardly)

propagated by senior executive actions, the symbolic component of senior executive

leadership can also be more subtle. Simply deciding whether (or not) to attend a meeting,

event, or gathering is taken as having implications for what the executive (and thus the

company) value. And what he or she chooses to wear can also matter.

In Who Says Elephants Can’t Dance (Gerstner, 2002, p.33), Lou Gerstner recounts

that when he had his first meeting as the new CEO of IBM with the top 50 people in the

company, he showed up wearing a blue shirt. At IBM, this was quite a departure from the

“uniform” of a white shirt and dark blue suit, which symbolized the traditional conservative

culture of the company. At his next meeting with the corporate management board, he again

donned a blue shirt, and noted that his top staff were now wearing blue (and other colored)

shirts. Not only were people watching (and emulating), but his actions were sending symbolic

signals beyond the attire itself about what was important at the “new IBM.”

Private actions such as personal donations to political and controversial causes may

also be parsed and given meaning about the entire organization’s values and intentions. Both

Jeff Bezos, CEO of Amazon; and Dan Cathy, CEO of the U.S.-based fast-food restaurant

Chick-fil-A made headlines with their private donations to organizations that were lobbying

for, and against, same-sex marriage, and risked alienating strongly opinionated customers on

the “opposing” side who perceived the CEO’s private actions as being indicative of the
corporation’s values. Taken together, these five factors significantly differentiate senior

executive leadership from leadership at other levels of the organization.

Do Executive Leaders Actually Matter?

The decisions and actions of senior executives can lead an organization to failure. And the

adept leadership of a senior executive team can place an organization in a position to be

wildly successful. Entering a new market, navigating crisis, and dealing with environmental

shifts are critical tasks that executives can handle well, or poorly. So it appears as a given that

senior executives matter to organizations. There is widespread acceptance by most lay people

and leadership scholars that the leadership actions of senior executives have real

consequences (Carpenter, 2011); however this view is not universal.

A view foreign to many leadership scholars, although held by some organizational

theorists, is that leaders in organizations are greatly constrained—by the pre-existing

configuration of their resources, cultures, and by strategic and operational inertia that is

embedded in the organizational system (e.g., Carroll & Hannan, 2000; Hannan & Freeman,

1989; Powell & DiMaggio, 1991). In these views of organizations, the inertia of

organizations and pressure to mimic other organizations in an industry leaves little room for

leadership actions to really matter. Indeed, this is not just a scholarly argument—firms (and

leaders who set strategy) do indeed copy each other, are subject to inertial pressures, and

senior executive leaders often admit that they do not have the freedom to do whatever they

want. As a result, the possibility for a given senior leader to have a unique and significant

effect on organizational-level outcomes may not always be unlimited, and in some cases may

be quite limited.

Two studies are often cited as evidence that senior executives are not particularly

important to organizational performance (Zaccaro, 2001). The first study, by Lieberson and

O’Connor (1972), examined executive succession over a 20-year period. Using a variance
decomposition analysis, they estimated that a change in leadership (which is the method they

used to estimate the inferred impact of leadership) was associated with changes in sales,

earnings, and profit margins of between 6 per cent and 32 per cent, three years after

succession, which is taken to be evidence of a small effect of leadership. The second study

examined changes in city expenditures attributable to mayoral changes in 30 U.S. cities over

an 18-year period (Salancik & Pfeffer, 1977). Their findings suggest mayoral changes

explained between 6 per cent and 10 per cent of the variance in city income and expenditures,

which again is interpreted as being indicative of a small effect of leadership.

A more recent and comprehensive variance decomposition study was recently

undertaken by Wasserman, Nohria, and Anand (2010), who examined the impact of

leadership changes in 531 firms across 42 diverse industries. This study examined two

different organizational-level financial performance variables: return on assets and Tobins Q

(a ratio of the firm’s market value divided by its book value). Return on assets represents how

efficiently the organization uses its assets (i.e., an internal indicator of performance), whereas

Tobins Q is an indicator of the market’s perception of the future prospects of a firm’s

profitability or use of assets. The overall CEO effect was similar using both metrics (13 per

cent and 15 per cent).

As others have pointed out (Day & Lord, 1988; Finkelstein, Hambrick, & Cannella,

2009), the heavily biasing methodological choices made by most of this leadership

succession research (e.g., not controlling for size of the city budget in the Salancik and

Pfeffer study) has led to a significant underestimation of leadership effects. In the first two

studies (Lieberson & O’Connor and Salancik & Pfeffer) mentioned above, the leadership

effects have been reestimated using a slightly different methodology at between 20 per cent

and 45 per cent (Day & Lord, 1988)—much higher than the original estimates.
 Perhaps an even bigger point with regard to these studies, however, has to do with the

interpretation of even the smallest estimated effects. Rather than concluding that 10 per cent

is a small effect indicative of little evidence for the importance of leadership, this result is

more appropriately interpreted as being indicative of a substantial effect (Day & Lord, 1988;

Zaccaro, 2001). In organizational research, attributing a 10 per cent change to a single

variable is almost never seen as being indicative of that variable’s marginality. And finally,

examination of organizational performance outcomes are certainly important (as these studies

have done), but executive leadership also has significant effects on important organizational

strategies and structure variables (Hambrick, 2007).

So do senior executive leaders matter? Yes. Are they the only important factor in

determining organizational outcomes? Certainly not. Industry, momentum, patents,

macroeconomic conditions, and a host of other factors are important determinants of

organizational-level outcomes, and a leader’s latitude of possible action can be significantly

constrained (discussed more later in the chapter).

With the question of “if” senior executives matter being answered in the affirmative

(and with noting of constraints), the questions that scholars are now concerned with have

squarely shifted (Carpenter, 2011) to understanding the various ways that senior

organizational leaders affect not only organizational-level outcomes (such as ROA or other

measures of success), but also the mechanisms and predictors of strategic decisions and

organizational action.

What can go wrong? Are certain strategies and behaviors more or less effective in

certain industries or environments? How can we predict the strategic actions of a given

executive if we know something about his experience, personality, or values? These are the

broad types of questions that are of interest to scholars of senior executive leadership, and are

described in the following sections—but before exploring the existing research on predictors,
we provide a brief overview of the three broad types of organizational-level outcomes that

have been examined: strategy, culture, and performance.

Organizational Outcomes Associated with Senior Executive

Leadership

Just as the nature of executive leadership tasks, roles, and functions is different in some

important ways from leadership at lower organizational levels, so is the nature of the criterion

variables that are possible (and relevant) at the executive level (DeChurch, Hiller, Murase, &

Doty, 2010). The primary difference is that senior executives have the potential to impact the

organization’s overall strategy and, ultimately, performance.

Positional leadership at the lowest managerial level (e.g., a foreman) may be related to

individual-level outcomes (such as satisfaction), and team-level outcomes. Middle-level

leaders who are responsible for managing other managers (i.e., those responsible for a unit or

division) may impact individuals, teams, and their unit or division (Palanski & Yammarino,

2009). Executive leadership is the only level of leadership at which one individual (i.e., the

CEO) or a small group of individuals (i.e., the top management team) can have such a direct

impact on firm-level strategies and outcomes. This does not diminish the fact that leaders at

all levels are key contributors to organizational success—indeed collective efforts at lower

levels can be important to organizational-level outcomes (Yukl, 2008), but the decision

power of the CEO and its top management team members allow for a clear and direct

relationship between their idiosyncrasies, decisions, and behaviors with firm-level outcomes

(Kaiser et al., 2008).

Senior executives undoubtedly influence individuals and teams as well, but because

these mechanisms of leadership on individuals and nonexecutive teams are, to a great extent,

similar to more general leadership mechanisms of influence and impact (and are covered well

by other chapters in this book), we focus here on the unique organizational-level effects that
senior executive leadership can have. Research in the field of executive leadership has

examined a wide variety of organizational-level outcomes, the vast majority of which can be

classified within three broad categories: (1) strategy, (2) culture, and (3) performance.

Strategy

Firm strategy (both the enactment of and decisions about) is the most frequently used

category of outcome variable in strategic leadership research. Senior executives (and in

particular the CEO) are the primary actors responsible for setting a firm’s direction and,

within notable boundaries, have significant ability to develop and enact strategy. A firm’s

strategy is sometimes the result of copying peers or moving along an inertial path, but often

the development and enactment of strategy is an idiosyncratic cognitive process that flows

from the way senior executives understand and interpret their organization and the

environment (Miller, Burke, & Glick, 1998). Firm strategy represents a more proximal

outcome variable than firm performance (which can be influenced by many factors), thus

suggesting that the effect sizes should be greater when predicting firm strategies with leader

and leadership characteristics than when predicting firm performance (Finkelstein et al.,

2009)—although this generally held assumption has never been comprehensively examined.

Prior work has examined multiple specific firm-level strategies such as innovation

(Miller, Kets De Vries, & Toulouse, 1982; Papadakis & Bourantas, 1998), acquisitions

(Chatterjee & Hambrick, 2007), geographic and product diversification decisions (Wiersema

& Bantel, 1992), firm risk taking (Li & Tang, 2010), and entry mode choices (Herrmann &

Datta, 2002). Scholars have explored the influence of executive leadership on organizational

structure, which is both a strategy in its own right (e.g., strategic organizational restructuring)

and a means to support other strategic actions. Structurally related outcomes include variables

such as centralization and formalization (e.g. Miller et al., 1982; Miller & Droge, 1986;

Miller & Toulouse, 1986a; 1986b).

 In the literature on executive succession, strategic outcomes have most often been

examined in terms of strategic change (Hutzschenreuter, Kleindienst, & Greger, 2012),

including: shifts in core business (Wiersema, 1995), diversification (Bigley & Wiersema,

2002; Boeker, 1997a, 1997b; Kraatz & Moore, 2002; Sakano & Lewin, 1999) and divestiture

of businesses (Barron, Chulkov, & Waddell, 2011; Denis & Denis, 1995; Shimizu & Hitt,

2005; Weisbach, 1995).

In studies using publicly traded (and typically larger) organizations, researchers have

generally relied on measures of strategic behavior collected indirectly from databases, such as

inferring strategic internationalization from a measure of foreign sales divided by total sales

or the number of countries in which the firm operates (e.g., Carpenter, Sanders, & Gregersen,

2001). Direct-measure surveys of executives are more commonly used in sampling small-

and medium-sized organizations.

Culture

Organizational culture, defined as the basic assumptions shared by organizational members

(Schein, 2010) is often thought to be linked to senior organizational leaders, and particularly

founding CEOs (Davis, 1984; Morgan, 1997). There is limited empirical evidence examining

this set of outcome variables, but what research there is tends to suggest that CEO leadership

behaviors, values, and personality generally influence organizational culture (see Tsui,

Zhang, Wang, Xin, & Wu, 2006, for a nuanced qualitative study within the Chinese context).

For example, Berson, Oreg, and Dvir (2008) examined how CEOs’ values predict the type of

culture in place within organizations (e.g., bureaucratic, supportive, and innovation oriented),

and Giberson and colleagues (2009) examined the link between CEO personality and the

cultural values of employees. Culture has generally been measured using reports from top

management or employee perceptions, and, due to the fact that culture is a multifaceted
construct, it is perhaps not surprising that culture has been assessed along a variety of

dimensions and frameworks.

Performance

Together, strategy, structure, and culture are seen as some of the mediating mechanisms

through which CEOs are likely to impact the ultimate category of organizational outcomes—

firm performance, although CEO characteristics are sometimes also linked directly with

organizational performance (e.g., Chatterjee & Hambrick, 2007). A wide variety of objective

firm performance indicators have been examined in the executive leadership literature,

including various accounting measures of performance (e.g., return on assets, return on

investment, return on equity), market-based measures of performance (e.g., sales growth,

market-to-book ratios, stock price), and firm survival. Notably, recent work has taken a

broader view of firm performance by expanding the criterion domain to include indicators

such as corporate social performance (e.g., Manner, 2010).

Generally, these performance measures are examined using independently verifiable

data that is part of the financial and stock-price record of publicly traded companies, but

when examining private firms (for which objective measures of performance are difficult to

obtain) self-report measures of performance have also been used (e.g., Di Zhang & Bruning,

2011; Ling, Simsek, Lubatkin, &Veiga, 2008; Ling, Zhao, & Baron, 2007). Perceptual

measures of performance usually ask the CEO or the TMT members to rate their

organizations in comparison with their major competitors on different performance measures

such as total sales, profitability, and growth (see Gupta and Govindarajan, 1986, for an

example).

In sum, a key differentiator in the study of executive leadership is the level of the

outcome variables predominantly used to assess leadership effects. It is hard to imagine

examining organizational-level outcomes resulting from a particular a team foreman, yet it is

much easier to conceptualize (and find evidence for) for organizational strategies and

organizational performance resulting from senior executive leadership characteristics and

behaviors. This difference in the level of manifestation and analysis of outcome variables

makes the study of executive leadership unique from the examination of leadership at other

hierarchical levels and unique from informal (nonpositional) leadership.

Predicting Organizational-Level Outcomes

One of the primary ways that research on senior executive leadership has sought to

understand the effects that leaders can have is through examining stable individual difference

variables. Researchers have studied personality characteristics, background and prior

experiences, values, and a host of related visible and underlying characteristics of both

individuals and top management teams. The logic is that, rather than being a function of a

perfectly rational and omniscient calculus, the decisions and actions that executives take

are—to a significant degree—a function of their idiosyncrasies, behavioral styles and

tendencies, and backgrounds. Although there is still much to be understood, the last 30 years

of research findings have shown significant evidence that organizational strategies and

outcomes can be better comprehended by understanding the nature of the senior executives

who perceive, interpret, decide, and act on behalf of their organizations (Hambrick, 2007;

Kaiser et al., 2008).

An instance of how an executive’s individuality can affect strategic actions of an

organization is evident in the case of Google in mainland China. After four years of operating

in China, Google ceased operations there in 2010, which many observers chided as foolish

given the size and growth of the Chinese market (Vascellaro, 2010). So why did they decide

to pull out of China at a time of rapid growth? The answer lies largely in knowing something

about one of Google’s cofounders—Sergey Brin. Brin, who spent his early years in the Soviet

Union, saw his family experience significant religious discrimination and harassment in the
totalitarian regime of his homeland. Decades later, as a key decision maker at Google, his

dislike for governments and regimes that he saw as invasive and totalitarian reemerged. After

becoming suspicious that the Chinese government was attempting to spy on dissidents by

breaking into their Google e-mail accounts, and also seeing the apparent theft of Google’s

intellectual property in China, he argued that the cost of doing business in China was morally

and ethically too high. The purported actions in China reminded Brin of the repression and

censorship that his family fled, and led him to note that “in some aspects of their policy,

particularly with respect to censorship, with respect to surveillance of dissidents, I see the

same earmarks of totalitarianism, and I find that personally quite troubling” (Vascellaro,

2010, para. 3). In the end, these events weighed heavily on Brin and became the deciding

factor in leading Brin to convince his cofounder Larry Page, as well as Eric Schmidt (the

CEO at the time) to pull business operations out of mainland China.

Despite all of the business reasons to continue operating in China, the previous

experiences and values of Sergey Brin ultimately led the company to take a major strategic

action that was not otherwise going to take place. More than merely the occasional anecdote,

the systematic study of strategic leaders and their characteristics has proven to be a valuable

lens for understanding strategic actions and outcomes in organizations. We turn first to

demographic predictors, followed by a discussion of research on the impact of executive

personality and values.

Demographic Variables

Age. Increasing age has been linked with a general preference for greater stability and

increasing levels of cognitive inflexibility in the general population—which not surprisingly

has notable implications for executives who are involved in strategic decision making and

organizational actions (Child, 1974; Hart & Mellons, 1970; Herrmann & Datta, 2006; Taylor,

1975). As one of the most studied demographic variables in the field of strategic
management, increasing executive age has been shown to be related to lower levels of

strategic change (Wiersema & Bantel, 1992), choice of less risky/resource intensive modes of

entry into a new market (i.e., joint ventures as opposed to greenfields) (Herrmann & Datta,

2006), pursuit of safer strategies (Karami, Analoui, & Kakabadse, 2006) including lower

R&D spending (Barker & Mueller, 2002), commitment to the status quo (McClelland, Liang,

& Barker III, 2010), and lower corporate growth (Child, 1974; Hart and Mellons, 1970).

While there is some agreement on the influence of top executives’ age (and collective TMT

age) on strategic decisions, recent research has most frequently used top executive age as a

control variable as opposed to a substantive variable of interest.

Tenure. Tenure is the single most studied demographic variable at the top

management level. Hambrick and Mason (1984) suggested top executives with longer tenure

are more likely to take the organization “as is,” and thus less likely to adopt new ways of

doing things. Similar to the rationale and findings with executive age, longer organizational

tenure has been linked to less corporate strategic change and greater commitment to the status

quo (Boeker, 1997b; Finkelstein & Hambrick, 1990; Hambrick, Geletkanycz, & Fredrickson,

1993; Wiersema & Bantel , 1992), more conservative attitude toward change (Musteen,

Barker, & Baeten, 2006), and less innovation adoption (Kimberly & Evanisko, 1981).

Tenure and age are not identical variables. What they are taken to represent are in

some cases similar, but tenure is often considered to be representative of a variety of

additional variables that are not associated with age. In other words, although both age and

tenure have been found to be negatively associated to similar outcome variables such as

innovation adoption and strategic change, the mechanisms that explain these relationships are

fundamentally different. For example, the logic by which tenure is negatively related to

strategic changes and innovations is that new externally appointed executives (with new
perspectives) are likely to have fewer obligations to internal constituencies, making them

more successful in introducing changes and innovations (Kimberly & Evanisko, 1981).

Tenure has also been used as a proxy for power. Finkelstein and Hambrick (2006)

suggested that CEOs with longer tenure have more power since some bases of power require

time before taking effect. For example, over time CEOs might be able to select board

members that will be sympathetic to them, thus increasing their power.

As is apparent with the case of tenure, one of the difficulties with demographic

variables is that the same variable may be taken to be representative of several different

constructs from study to study. Tenure may be correlated with both power and commitment

to the status quo (for example), but care needs to be taken in inferring that these demographic

variables are actual representations of the underlying constructs of power or commitment to

the status quo. In the case of tenure, perhaps part of the answer lies in three different

operationalizations of tenure that have been used: tenure in position (i.e., tenure as a CEO),

organizational tenure, and industry tenure. These three operationalizations of tenure likely

provide slightly different information about executives. For example, tenure in position might

be more appropriately representative of CEO power, organizational tenure might be better to

assess CEOs’ commitment to strategic status quo, and industry tenure may be used as more of

a general past experience measure. In a recent paper, Weng and Lin (in press) start to shed

some additional light on the conceptualization and measurement of tenure in predicting

strategic change by suggesting that prior CEO experience should be measured not only

through one of the typical measures (e.g., tenure in the position), but also prior board

experience and prior experience as the heir apparent as an indicator of “newness.” Clearly,

care needs to be taken in making appropriate inferences from demographic variables.

Background: Experience and education. The work-related and academic backgrounds

and qualitative previous experiences of executives are another class of individual difference
variables that have been shown to have relevance in the strategic leadership context. Work-

related experience has been operationalized as functional diversity (i.e., breadth of exposure

to different functional areas such as marketing, accounting, general administration, HR, etc.),

general functional background, throughput versus output background (i.e., production,

process R&D, and accounting are considered “throughput” backgrounds and marketing and

sales, merchandising, product R&D, and entrepreneurship are defined as “output”

backgrounds), entrepreneurial experience, executive management experience, and

international experience.

As opposed to other demographic variables that are used to predict strategic decisions

and other proximal strategy variables, past experience has been regularly related to firm-level

performance outcomes. For example, CEO international experience (Slater & Dixon-Fowler,

2009) and breadth of functional experience (Manner, 2010) were found to be positively

associated with corporate social performance, whereas TMT functional diversity (Buyl,

Boone, Hendriks, & Matthyssens, 2011), CEO executive-level management experience

(Stone & Tudor, 2005), and CEO international experience (Roth, 1995) were found to be

related to firm performance (operationalized as ROS, ROA, and income growth respectively).

These studies also emphasized potential moderators likely to explain prior conflicting results

in the literature. For example, Buyl and colleagues (2011) found that TMT functional

diversity will have a greater impact on firm performance when the CEO’s expertise and

background characteristics facilitate the exchange and integration of the diverse views within

the TMT.

The other subcategory of what we refer to as background is education. After tenure

and age, education is the single most studied individual difference at the top executive level.

Education has generally been operationalized in two different ways: level of education and

field of study. Both the level and type of formal education of top executives provide some
measure of their competencies and individual knowledge (Hambrick & Mason, 1984; Hitt &

Tyler, 1991).

Some scholars have suggested that level of education reflects an individual’s

cognitive capacity and skills (Wieserma & Bantel, 1992). For example, top executives with

higher levels of formal education have more tools to envision creative solutions when

confronted with complex situations (Karami, Analoui, & Kakabadse, 2006). Level of

education has been associated with different firm-level outcomes such as change in corporate

strategy (Wieserma & Bantel, 1992) and openness to innovation (Kimberly & Evanisko,

1981).

Field of education has also received some attention under the logic that the type of

content studied has the power to alter values and behavioral beliefs (Frank, Gilovich, &

Regan, 1993), although it is also likely to be an indicator of preexisting beliefs, values, and

preferences (Holland, 1959). As an example of this type of research, Manner (2010) found

that organizations led by CEOs with degrees in humanities had stronger corporate social

performances than those led by CEOs with degrees in economics.

Gender. The vast majority of senior executives in large organizations (the primary

focus of strategic leadership research in the past), have historically been male (Ragins, 1998).

And even as of late 2012, only 20 women were CEOs of the 500 largest US publicly traded

companies. Perhaps partly because of the lower propensity of female senior executives (and

particularly CEOs), gender is rarely used as a substantive variable of interest, and little is

known about the impact of gender on strategic decision making and outcomes, although it is

typically used as a control variable in more recent research (e.g., Ciavarella, Buchholtz,

Riordan, Gatewood, & Stokes, 2004; Wallace, Little, Hill, & Ridge, 2010; Wang, Tsui, &

Xin, 2011). In one of the few empirical studies that has tested the main effect of gender,

Musteen and colleagues (2006) found that female CEOs were more open to change. Their
rationale was that, in making their way up in an organization, a female executive is

conditioned differently. By the time she reaches the C-suite, she has had to prove herself so

many times in so many different ways that she has become accustomed to demonstrating

considerable entrepreneurial initiative and finding innovative solutions to work problems—

which leads her to be more open to strategic change than a male counterpart.

Executive Personality and Values

A more clearly psychological approach to understanding executive leadership comes in

utilizing stable dispositional characteristics as predictors of executive strategic action and

firm outcomes. In contrast with a general indifference about the substantive use of

demographic variables by many current executive leadership scholars, research examining

the impact of executive personality, values, and beliefs has been of significant interest since

the birth of strategic leadership research and is gaining momentum—these variables generally

allow for a deeper and richer conceptual explanation of executive decisions and actions.

Locus of control. The study of executive personality’s influence on organizational

outcomes was first systematically investigated by Danny Miller and colleagues, who

examined the effects of internal locus of control—the extent to which one believes that life is

within one’s control rather than due to chance or fate (Rotter, 1966)—on both strategy and

organizational performance. Whereas various other personality variables are often more

distally or complexly related to firm-level performance indicators, there appears to be fairly

consistent support for a linkage between locus of control and firm performance. CEOs who

have a higher internal locus of control lead companies to better performance than CEOs with

a more external locus of control (Miller & Toulouse, 1986a; 1986b; Sidek & Zainol, 2011;

Van de Ven, Hudson, & Schroeder, 1984). More recently, executive locus of control has been

examined in entrepreneurial settings, and has been positively related to both business

performance and venture growth (Lee & Tsang, 2001; Sidek & Zainol, 2011).
 The growth and performance effects of locus of control may result from a number of

mechanisms. First, it may be that executives work harder and are more effective in

implementing whatever strategy they choose (Boone, De Brabander, & Witteloostuijn, 1996).

Second internals, who are more agentic in their outlook and who possess significant self-

control and persistence, may pursue more innovative strategies and seek out new

opportunities (Miller et al., 1982; Ng, Sorensen, & Eby, 2006). For example, Halikias and

Panayotopoulou (2003), using a sample of small-to-medium enterprises from Greece, found a

positive relationship between CEO internal orientation and a firm’s export involvement.

Third, although not empirically examined in the upper echelon literature, there is evidence

that leaders possessing an internal locus of control are more likely to be perceived as being

transformational (Howell & Avolio, 1993), which could result in increased effort by others

and enhanced leadership legitimacy.

In sum, executives who more strongly believe in self-control of life’s outcomes (i.e.,

internal locus) seem to manifest this belief in the organizations they run—they embrace

(rather than avoid) challenges, adapt through innovative firm strategies, take advantage of

opportunities, even those that require significant effort and foresight. Their choices and style,

in turn, are positively related to the performance of the organizations they lead.

Views of self: Hubris, narcissism, and core self-evaluation. Research interest in

CEOs’ views of self-worth and potency is traceable most directly not to psychologists or

strategists, but to economist Richard Roll’s (1986) “hubris hypothesis” of corporate

takeovers, in which he argues that overpaying for a target company is the result of hubris

(i.e., exaggerated self-confidence) on the part of the bidding CEO. From this initial

conceptual work, empirical research on views of self in the executive arena has considered

three related but distinct variables: hubris, narcissism, and core self-evaluations (Chatterjee &
Hambrick, 2007; Hayward & Hambrick, 1997; Hiller & Hambrick, 2005; Li & Tang, 2010;

Resick et al., 2009; Simsek, Heavey, & Veiga, 2010; Zhang, Peterson, & Reina, 2013).

Hubris. Drawing directly from Roll’s postulations about overpaying during corporate

takeovers, Hayward and Hambrick (1997) examined a number of proxy measures for hubris

to predict overpayment in corporate takeovers. The rationale is that CEOs who possess

exaggerated self-confidence in their abilities are not likely to be concerned with quibbling

over purchase price. Why worry about what you pay when you, as CEO, believe that the

company will be worth many times more when you and your superior skills get ahold of it?

Or as famed investor Warren Buffett noted: “If investors instead bankroll princesses who

wish to pay double for the right to kiss the toad, those kisses had better pack some real

dynamite. We’ve observed many kisses but very few miracles. Nevertheless, many

managerial princesses remain serenely confident about the future potency of their kisses”

(Buffett & Cunningham, 2001, pp. 12–13). Indeed, it appears that CEOs inflicted with hubris

are veritable royalty in their own minds, and whatever they pay for a company when they

acquire it is seen to be a worthy investment because of the value they can add to the acquired

company.

Using observable variables as approximations of CEO hubris (such as recent media

praise for the CEO that is believed to “puff” him or her up, and the CEO’s pay relative to the

next highest paid executive), Hayward and Hambrick (1997) were able to substantially

predict overpayment in corporate acquisitions—in line with Warren Buffett’s observation.

The effect size from their findings translates such that, for example, in a billion-dollar

acquisition, a CEO would be expected to overpay for the target company by $48 million for

every media article previously written about him or her. Celebrity appears to have real

consequences.
 In a recent study of firm risk taking, Li and Tang (2010) hypothesized that hubris

would lead CEOs to overestimate the likelihood of success associated with their strategic

initiatives and thus take greater strategic risks. Using the deviation between the CEOs’

subjective evaluation of firm performance and an objective accounting performance measure

as an indicator of hubris in a sample of 2,790 Chinese CEOs and firms, they found evidence

that CEO hubris was positively associated to firm risk taking.

Although the idea of hubris (exaggerated self-confidence) has merit, the concept is

less rigorous than two well-validated psychological constructs that can be used to

conceptualize executive self-worth: narcissism and core self-evaluations (Hiller & Hambrick,

2005). Both of these constructs enjoy a more research-validated psychological tradition

(including definition and measurement) than hubris, and as such, have garnered the bulk of

research attention on this general topic in the past decade. Yet it should be noted that at the

same time that narcissism and core self-evaluations are both constructs related to “self-

worth,” or what we might colloquially term “ego”—the two constructs are distinct, and

evidence is beginning to suggest that these individual differences are often differentially

predictive of outcomes.

Narcissism. Narcissism in the context of senior leadership is a topic that has garnered

significant media attention, conceptual thinking, and increasing empirical work in the last

decade. Although on the surface it may be difficult to distinguish narcissists from those with

a very high and stable sense of self-esteem and worth (CSE), and narcissists may be plagued

by exaggerated self-confidence (hubris), narcissism is both conceptually and empirically

distinct. As both an enduring personality trait that can also be affected by life circumstances,

narcissism is characterized by a number of markers, including a grandiose sense of self-

importance, entitlement, a continuous need for validation and admiration, lack of empathy,

and envy.
 A critical distinguishing feature of narcissism is that although individuals high on this

trait exhibit behaviors consistent with an extremely high sense of self-worth and often engage

in grandiose displays, true narcissists—and narcissistic leaders—actually have a fragile sense

of self-worth and feelings of inferiority that need continual validation. Thus, they are

hypersensitive to criticism and prone to envy and other threats to their fragile sense of self

(see Rosenthal & Pittinsky, 2006, for a summary and also description of some of the debates

about the construct in the general context of leadership). Although narcissists are often

painted as being wholly negative in the context of leadership and their effect on

organizations, it is also important to recognize that a simple “good or bad” distinction when it

comes to narcissism actually requires a bit more nuance.

In the context of senior executive leadership, CEO narcissism has been related to

glory-seeking behaviors: sometimes these initiatives appear to be successful, and at other

times they are not successful. For example, narcissistic CEOs were found to make more

large-scale strategic changes and have resulting larger fluctuations in firm performance than

their counterparts who were lower in narcissism (Chatterjee & Hambrick, 2007), but there

was no overall main effect of narcissism on firm performance. So, it appears that their glory-

seeking behaviors sometimes led to glory (in the form of return on assets), and sometimes

lead to underperformance. Understanding the specific conditions under which narcissism may

be positive and/or negative for firm performance is an avenue that could benefit from further

study, although a new paper (discussed below) sheds some light on this topic.

In a follow-up paper with two separate studies, the same two authors took a trait-by-

situation approach and argued that the effects of narcissism may be pronounced or muted

depending on the situation (Chatterjee & Hambrick, 2011). They argued that, because of their

desire for validation from others, narcissistic CEOs who get validation in the form of media

praise and awards (which, as noted above, has previously been used as an indicator of hubris
in Hayward & Hambrick, 1997) will be emboldened to make even riskier and large-scale

growth and investment decisions than narcissistic CEOs who didn’t receive this type of

praise.

Are narcissistic CEOs less transformational? Two studies have examined the

connection between narcissism and transformational leadership: one providing evidence for a

negative relationship and the other finding no effect. In a sample of 80 CEOs in New Zealand

who were evaluated with a self-report direct measure, narcissism was negatively related to

transformational leadership (Khoo & Burch, 2008), but in a study of Major League Baseball

presidents over a 100-year period (Resick et al., 2009), an archival historiometric measure of

narcissism was unrelated to transformational leadership.

Conceptually, narcissistic senior executives, who are focused on themselves and their

own goals and who may get envious of others are likely to have difficulty engaging in a

developmental and bidirectional social process characteristic of transformational leadership

(Rosenthal & Pittinsky, 2006). Yet on the other hand, their grandiosity may allow them to

hold and paint a vision of future organizational wins that others can buy into, and their desire

for validation from others can make them compellingly charming and charismatic. So, in total

it appears that the verdict is still out on whether and how narcissism is related to

transformational leadership, but the self-focus of narcissism is likely to be negatively related

to another form of leadership: servant leadership.

Consistent with the idea that narcissists are focused largely on themselves and

maintaining their superior status, Peterson, Galvin, and Lange (2012) examined narcissism

and servant leadership. Their study of 126 technology CEOs found that narcissists are less

likely to have a self-identity tied to the organization, and that this lower level of

organizational identification is a partial mediating mechanism in explaining lower levels of

servant leadership.
 Core self-evaluation. The third self-focused variable that has been examined in

strategic leadership research is the variable of core self-evaluation (CSE) - the global and

stable evaluation one makes about one’s own self-worth and capabilities (Chang, Ferris,

Johnson, Rosen, & Tan, 2012; Judge, Locke, Durham, & Kluger, 1998). High CSE

individuals view themselves positively and as capable and active agents in the world. They

possess a high degree of confidence, but in contrast with hubris, it is not necessarily

exaggerated confidence. CSE, by definition, sits conceptually at the intersection of four well-

studied psychological traits: self-esteem, generalized self-efficacy, locus of control, and

emotional stability (i.e., the inverse of the neuroticism component of the Big Five personality

dimension). Thus, at the intersection of these traits, high CSE individuals see themselves as

valuable, worthy, agentic, and they are relatively free from anxiety. Although most CEOs are

likely to have a healthy dose of CSE (Hiller & Hambrick, 2005), variability has been shown

(just as with other traits in the executive arena) to predict a variety of strategic and

organizational outcomes.

Using the most commonly validated self-report measure of core self-evaluations

(Judge, Erez, Bono, &Thoresen, 2003), Simsek and colleagues (2010) found that CSE levels

of a sample of 129 CEOs were related to the firm’s entrepreneurial orientation—with higher

CSE CEOs perceiving less threat and more opportunities—and thus creating an environment

where the top management team took more entrepreneurial risks. The results are suggestive

of a trickle-down effect of the leader (CEO) on the top management team’s strategic

orientation, and also perhaps a selection effect (that high CSE CEOs may select

entrepreneurial team members). Consistent with a premise of upper echelons theory

(Hambrick & Mason, 1984)—that CEO individual differences are more pronounced in

dynamic environments—results were pronounced in environments characterized by greater

levels of change.
 Contrary to the reported null findings on the relationship between narcissism and

transformational leadership (mentioned above), Resick and colleagues (2009) predicted and

found evidence for a positive relationship between CSE and transformational leadership.

Narcissism interacting with CSE. In a recent study examining the effects of both

narcissism and CSE on firm performance, Zhang and colleagues (Zhang, Peterson, & Reina,

2013) considered the interactive effects of these two personality variables using self-report

data from 155 CEOs in the computer software and hardware industries. They found evidence

for a moderated curvilinear relationship between narcissism and firm performance (ROA

measured one year later). When CEOs had a high level of CSE, there was a positive

curvilinear relationship between narcissism and firm performance. However, when CEOs

were low on CSE, there was a negative curvilinear relationship between narcissism and firm

performance, suggesting that narcissism, in moderation, can have positive effects on firm

performance (perhaps when it is of the “constructive” form as indicated by a concomitant

high level of CSE). One of the key implications of this study is that researchers may be well

served to take note of the explanatory power that comes from a more nuanced, interactionist

examination of narcissism—rather than simply searching for main effects. Additionally, this

study serves as another indicator that narcissism and CSE are two separate constructs that

have unique implications for the strategic leadership literature.

The Big Five. In the last three decades, evidence for the robustness of five broad and

distinct personality traits across cultures and measures, as well as evidence that they are

predictive of a variety of outcomes in both work and nonwork settings, has led to widespread

acceptance and use of the Five Factor Model among personality and organizational

researchers (Judge & Bono, 2000). The five traits (known often as the Big Five) are seen to

do a fairly good job in representing the broad dimensions on which people most centrally

differ: openness to experience, conscientiousness, extraversion, agreeableness, and

neuroticism (Costa & McCrae, 1992). This does not mean that the investigation of other traits

is irrelevant or that these five are sufficient in evaluating personality, but these five traits are

an important conceptual mechanism for understanding individuals, and by extension,

executive personality.

In the top executive arena, research examining one or more of these traits has only

taken place relatively recently, although it is gaining significant momentum (and is likely to

continue). Research into the Big Five traits has considered a direct link between traits and

firm performance, but has generally conceptualized and examined the traits as leading to

mediating action mechanisms (such as top management team flexibility or strategic actions),

which in turn lead to performance.

Peterson and colleagues’ (2003) often-cited paper was the first empirical study of

executive characteristics and strategy to investigate the five traits—examining the

relationship between CEO characteristics and top management team dynamics using archival

sources to gauge both CEO personality and TMT dynamics, and ultimately firm performance.

The authors found empirical support for their general claim that CEO personality impacts

TMT dynamics, which in turn are predictive of firm performance. They found, for example,

that CEO agreeableness was positively related to TMT cohesion and decentralization of

power, and that these and other indicators of TMT processes and dynamics were in turn

related to organizational performance (operationalized as income growth). Despite significant

questions about the robustness of their findings due to their small sample of only 17 firms

(Hollenbeck, DeRue, & Mannor, 2006), the study was a frontrunner in suggesting and

investigating a process mechanism (i.e., TMT dynamics) through which CEO personality is

related to organizational performance.

In a similar vein to the Peterson et al. paper, Nadkarni and Herrmann (2010)

examined the link between self-reported Big Five traits and firm performance using a sample
of 195 CEOs, finding that CEO personality impacts firm performance via the “mechanism”

of strategic flexibility. Emotional stability, extraversion, and openness were each positively

related to firm strategic flexibility. CEO conscientiousness, on the other hand, was negatively

related to strategic flexibility, and CEO agreeableness had an inverted-U relationship with

strategic flexibility. This study is one of the rare pieces of research that hypothesized (and

found support) for a nonlinear relationship between top executive personality and firm-level

outcomes—a possibility that holds great promise for future research.

In another paper examining the Big Five, Giberson and colleagues (2009) found

evidence that CEO agreeableness and emotional stability are positively related to the extent

to which their organizations are characterized by Clan culture values (i.e., cultures that focus

on flexibility and internal maintenance).

Last, in the entrepreneurship literature, Ciavarella and colleagues (2004) studied the

Big Five in the context of venture survival. They hypothesized and found support for a

positive relationship between an entrepreneur’s conscientiousness and long-term venture

survival, and somewhat surprisingly (and contradictory to the initial hypothesis), they found a

negative relationship between an entrepreneur’s openness to experience (i.e., a preference for

trying new things) and venture survival.

Considering that the Five Factor Model is one of the most robust and widely accepted

operationalizations of personality (Judge & Bono, 2000), it is surprising that there have not

been more studies of these traits in the executive leadership arena. One potential explanation

is that scholars of senior leadership and strategy have yet to suggest or develop proxy

measures of the five traits. In comparison to the study of narcissism or hubris for which

scholars have suggested proxy measures, Big Five research in the executive context has not

developed such indirect measures, although evidence from other fields of study suggests that

they could be developed (e.g., Back et al., 2010; Gosling, Ko, Mannarelli, & Morris, 2002).
 Need for achievement. Need for achievement, an individual’s need to be successful

and reach a high level of performance (McClelland, 1961) has also been shown to be relevant

in trait studies of senior executive leadership. The first few studies on the topic came from

Miller and colleagues in the 1980s. They found that executives with a high need for

achievement prefer to have control over their environment, thus favoring formalized and

centralized structures (Miller & Droge, 1986), broad aggressive marketing-oriented strategies

(Miller & Toulouse, 1986a; 1986b), and proactive decision making (Miller & Toulouse,

1986a; 1986b). Papadakis and Bourantas (1998) found that CEOs’ need for achievement is

positively associated with technological innovation. Relating need for achievement with

organizational performance, Lee and Tsang (2001) found that entrepreneurs’ need for

achievement had a positive impact on venture growth.

Risk propensity. Top executives’ risk propensity has received considerable attention

in the executive leadership literature over the past two decades. Researchers have used

multiple terminologies for ideas that fall under the same general idea: tolerance for risk

(Wally & Baum, 1994), risk orientation (Hitt & Tyler, 1991), and risk attitude (Papadakis &

Bourantas, 1998), to capture top executives’ attitudes toward risk. Individuals with a higher

tolerance and/or propensity toward risk prefer speedy decisions (Wally & Baum, 1994), are

assertive and responsive in decision making (March & Shapira, 1982), prefer decentralized

decision making (Papadakis., 2006), and this may lead to higher technological innovation

(Papadakis & Bourantas, 1998) and performance (Sidek & Zainol, 2011). In a novel study,

Cain & McKeon (2012) used US federal pilot license records as an indicator of risk

propensity and found that CEOs who held a private pilot’s license led companies with higher

amounts of leverage and produced greater stock market return volatility because of their

presumed willingness to seek and accept risk and take big chances.
 Executive values/integrity/authenticity. Values represent another class of relevant

individual characteristics by which to differentiate among executives. Rokeach (1973)

defined values as “enduring beliefs that a specific mode of conduct of existence is personally

and socially preferable to alternative modes of conduct or end-states of existence.” Values are

generally believed to be relatively enduring and appear to be linked to strategic decisions and

actions. Values can affect both initial perceptions of situations and subsequent strategic

decisions. In other words, not only do executives differ in how they perceive and interpret

situations based on their values, but they ultimately also discard (or lean toward) certain

choices on the basis of values (Hambrick & Mason, 1984).

Despite the apparent implications for strategic action, individual differences in the

form of values have rarely been examined. Berson, Oreg, and Dvir (2008) examined the

relationship between CEO values and organizational cultures and found that CEOs with self-

directing values had more innovative organizational cultures, security values were associated

with bureaucratic cultures, and benevolence values were related to supportive cultures. In

another paper, Ling, Zhao, and Baron (2007) examined the influence of founders-CEOs’

values (novelty and collectivism) on new venture performance. Using a self-report measure

of novelty and collectivism at the individual level developed by Simsek et al. (2005), the

authors found that CEOs’ values for collectivism had a stronger beneficial impact in larger

and older firms, whereas CEOs’ values for novelty had a stronger beneficial impact in

younger firms. Giberson and colleagues (2009), on the other hand, found limited support for

a linkage between CEO personal values and organizational culture. In fact, out of the 10

personal values they measured, only CEO status value (i.e., the need to be recognized and

desired by others) was related to organizational culture.

In a recent study of the connection between values, perceptions of leadership, and

performance (Sully de Luque, Washburn, Waldman, & House, 2008), CEOs who emphasized
economic values (i.e., who see their role as maximizing shareholder value) were perceived as

autocratic leaders by their followers, whereas CEOs who emphasized stakeholder values (i.e.,

see their roles as taking into consideration the needs of multiple constituencies) were

perceived as being visionary. In turn, visionary leadership was positively related to

employees’ extra effort and a perceptual measure of comparative firm performance,

suggesting that maximizing firm performance (and perhaps even economic or shareholder

value) may result somewhat paradoxically from a de-emphasis on economic value creation.

In other words, this study suggests that for employees to be engaged and committed to the

organization (and its performance)—a more holistic leadership narrative about the firm’s

values and stakeholders may be critical.

Conceptually related to the idea of values is the notion of virtues. In an investigation

of behavioral manifestations of virtues in a sample of 191 executives, Sosik, Gentry, and

Chun (2012) found that integrity, bravery, and perspective taking each accounted for

individual performance beyond a host of control variables. The extent to which virtues (or the

related concept of authentic leadership) of the CEO and/or TMT are related to firm-level

outcomes are unknown, but a cascading effect of CEO virtues and authenticity (Palanski &

Yammarino, 2009) might certainly be related to a host of team processes, strategies, and

firm-outcome variables.

Another interesting possibility with regard to values lies not in individual differences

in values, but in country-level differences. A group of executives in a given country are likely

to vary between each other in terms of their values, but we would also expect, on balance,

general values differences between executives in different countries (England, 1975). Buda

and Elsayed-Elkhouly (1998) found evidence for this—US executives were more motivated

by social recognition, whereas Egyptian executives displayed more interest in keeping a

comfortable life. Although this stream of research on nationally based differences in

executives’ values and the link to strategic actions has not been empirically evaluated, there

are clearly implications for predicting broad, national patterns of executive and firm behavior

based on values that executives from those cultures possess.

Cognition

Beyond differences in executive personality and values discussed above, the cognitions of

executives are also important to consider. In the executive domain, cognition research has

focused on understanding how the cognitive structures and processes of senior leaders affect

strategy formulation, strategic choice, and even organizational performance (Narayanan,

Zane & Kemmerer, 2011; Porac & Thomas, 2002). Although cognitions are sometimes

presumed from demographic variables such as experience, gender, or age, these demographic

variables are poor approximations of cognition (Barr, Stimpert, & Huff, 1992; Markoczy,

1997). Direct assessment of cognitive structures and processes is quite difficult, and is one

reason why executive cognitions are less often the focus for researchers interested in

executive leadership as compared with other forms of explanation of executive effects; but

cognition research is possible, and has progressed.

For instance, Kaplan (2008) examined the cognitive construct of attention by

examining annual letters to shareholders as a way to gauge the kinds of things that a given

executive was paying attention to. He found that CEO attention to technological innovation

impacts the subsequent level of investment in new technologies, and further, that it interacts

with the capabilities of the organization to predict strategy adoption. Researchers have also

studied the linkages between CEO cognitive complexity (i.e., the understanding of the

structure of the environment of the firm and its dynamics) and firm performance. Hackner

(1991), for example, found that the relationship between CEO cognitive complexity and firm

performance followed an inverted U-shaped curve. In a subsequent study by Calori, Johnson

and Sarnin (1994), the relationship between CEO cognitive complexity and firm performance
was found to be moderated by the environmental complexity, such that in high complexity

environments, high degrees of cognitive complexity led to more effective behaviors.

Nadkarni, Perez, & Morganstein (2006) used the cognitive constructs of executive

complexity and reactivity to explain why one UK-based firm’s internationalization efforts

were successful, whereas another was unsuccessful.

Discretion: When Do Executives Matter More or Less?

Thus far in this chapter, we have considered some of the general evidence about whether

executive leadership appears to matter to organizational outcomes and how it appears to

matter. Yet there is an important caveat about executive effects that is critical to

understanding the potential impact of senior executive leadership. This caveat is that the

potential impact depends on the situation; there are situations and conditions in which senior

executive leadership has a muted (or conversely, a pronounced) impact on strategy and

organizational outcomes. This idea—that a given executive may have differing latitudes of

action (and impact) from another executive is referred to as executive discretion (Hambrick &

Finkelstein, 1987).

When an executive is greatly constrained (i.e., has a relatively low amount of

discretion)—the potential for their leadership actions to affect the organization is relatively

less than when they are unconstrained. Having a degree of discretion, however, does not

necessarily mean that an executive will always act in a way that is any different from an

executive who has less discretion, but rather it implies the potential to do so—and it is this

potential that sometimes manifests in actual actions and performance.

A CEO who is also the chair of the board and the largest shareholder of a company is

likely to be able to consider and act in whatever strategic direction she wants. And further, we

would expect that her preferences and idiosyncrasies will thus be more likely to be reflected

in her strategic actions, as compared to a CEO who has relatively less power (i.e., a CEO who
is not the chair of the board and who has few shares). In other words, the ability of executive

personality and values to predict strategic action and organizational performance is

moderated by the degree to which the CEO can manifest those individual differences in

action.

What determines executive discretion? There are three general categories of factors

that influence an executive’s potential to act in divergent or novel ways: characteristics of the

environment, characteristics of the organization, and characteristics of the individual

executive.

Environmental determinants of discretion. Characteristics of the environment that an

organization operates in can have a significant impact on the level of discretion afforded to

executive leaders. These characteristics include macro factors such as country-level

institutions and industry characteristics such as industry-level regulations and the amount of

change or dynamism in an industry.

In the context of national-level environmental discretion, Crossland and Hambrick

(2007) found that CEO effects on organizational outcomes in Japan were the smallest,

whereas Germany and US firms showed larger CEO effects (with the United States showing

the greatest variance attributable to the CEO). They conjecture that differences in national

values (such as collectivism and uncertainty avoidance), ownership structure (how tightly the

firm is owned and who those institutional owners are), and board governance arrangements

are the drivers of these national-level differences.

Industry is another factor impacting executive latitude of action and potential impact.

Higher discretion is afforded to firms operating in less-regulated and higher-growth industries

structure (e.g., Finkelstein & Hambrick, 1990; Hambrick & Abrahamson, 1995)—for which

there is a wide range of options to meet the firm objectives—as well as to executives in firms

operating in more turbulent industries (Haleblian & Finkelstein, 1993).

 Two recent papers continue to show the importance of industry-level factors in setting

the boundaries for potential leadership impact. First, Wasserman and colleagues (2010) found

that industry effects were critical to differences in performance outcome variance attributable

to the CEO. They found, for example, that the CEO effect in the communications equipment

industry (where CEO action is much less constrained) was 10 times greater than in the meat

products industry, where CEOs are significantly constrained by a variety of factors, most

notably tight regulations. Second, Simsek and colleagues (2010) examined the importance of

industry dynamism (the degree of change in an industry) as an indicator of discretion.

Consistent with their argument that greater dynamism leads to greater discretion, they found

that in dynamic industries, individual characteristics of the CEO (specifically, CSE) were

more predictive of firm-level outcomes than in stable environments.

Organizational determinants of discretion. Organizations may also display

characteristics that limit or enhance executive discretion. The two most common

organizational-level determinants of discretion discussed in the literature are firm size and

firm age. Large mature firms are known for their stronger cultures and significant inertial

forces (Hannan & Freeman, 1977), and thus executives have a greater impact on

organizational outcomes in smaller and younger firms that have fewer inertial and historical

cultural forces. For example, Miller, Kets de Vries, and Toulouse (1982) found that CEO

locus of control was strongly related to firm strategy and structure in small firms, but not in

large ones.

Individual determinants of discretion. At the individual level, the discretion of a given

executive is largely a function of their power within the organization (Bigley & Wiersema,

2002; Finkelstein, 1992). For example, when a CEO is also the chair of the board, it increases

his discretion (Bigley & Wiersema, 2002), and CEOs who are founders of the organization

have higher levels of discretion in comparison to CEOs who are not (e.g., Adams, Almeida,
& Ferreira, 2005). Although it has not been investigated, we might also expect that

transformational behaviors and executive charisma would lead to increased discretion.

In sum, managerial discretion is an important concept in refining our understanding of

the linkages between executive leadership and firm-level outcomes, and it may also help

reconcile variations in prior findings about executive effects (Hutzschenreuter et al., 2012).

Top Management Teams

While significant research (and media) attention is often paid to the CEO (Mooney &

Amason, 2011), the CEO does not decide and act in isolation. Other senior executives,

usually known as the top management team, can be involved in a variety of ways. Specific

individuals or the team collectively may be consulted when framing and making actual

decisions, or their influence can sometimes be more indirect. TMT members are also often

critical for the implementation of strategy, which may again take the form of a top-down

process or a more collective shared process. From a core leadership perspective, an explicit

examination of the role and influence of the top management team (not just the CEO) helps to

shift the focus away from conceptualizing executive leadership as being primarily about an

individual leader to a more realistic recognition that leadership can, at the same time, be

distributed and/or may be the property of the entire team (Denis, Langley, & Sergi, 2012).

Team Composition/Demography

A significant amount of research on top management teams has focused on explaining

organizational strategy and performance outcomes using team composition variables—

typically examining demographic characteristics such as age, tenure, gender, and functional

background of team members, or characteristics of the team itself such as team size. This

composition/demographic approach has fairly consistently shown that the composition of the

top management team is predictive of strategic actions and organizational outcomes and has
been aided by the relative ease in collecting demographic characteristics of TMT members

from existing and reliable databases (e.g., ExecuComp).

One of the most cited papers using a team composition approach (Wiersema &

Bantel, 1992) found that TMTs characterized by lower average age, shorter organizational

tenure, higher education heterogeneity, and higher education level tend to pursue more

changes in corporate strategies. Carpenter (2002) predicted return on assets with TMT

educational, tenure and functional heterogeneity, and TMT demographics have been used to

explain other strategy/outcome variables such as commitment to innovation (Daellenbach,

McCarthy, & Schoenecker, 1999), expansive global strategies (Sanders & Carpenter, 1998),

new venture performance (Amason, Shrader, & Thompson, 2006), and ability to successfully

complete an initial public offering (Beckman, Burton, & O’Reilly, 2007).

As with demographic and other surface-level variables in CEO-focused research,

demographic or observable composition variables alone have some limitations in terms of

being able to explain the underlying processes and mechanisms of action (Hambrick, 2007),

and often the actual underlying mechanisms through which demographic variables have their

effect are simply inferred. For example, greater diversity in the type of education of top

management team members is taken to be representative of a higher degree of cognitive

processing capacity from which the team can draw (Carpenter & Fredrickson, 2001) and team

size is inferred to be an indicator of a team’s ability to process complex information (Sanders

& Carpenter, 1998). In some cases the veracity of the mechanisms inferred from the

compositional characteristics may be acceptable, but in other cases there should be cause for

question. Team size, for example, is not particularly representative of the information

processing capacity of a team (Mesmer-Magnus & DeChurch, 2009).

At the same time that there are some significant hurdles and limits with the

composition/demographic approach, it is certainly not devoid of examination of mechanisms

and processes. In an attempt to mitigate concerns about the ambiguous link between

composition and outcomes, some research has explicitly examined process or team properties

such as cohesion variables as a mediator (e.g., Smith et al., 1994; Peterson et al., 2003). And

further, even when composition is considered without explicitly examining possible

intervening mechanisms and states, there is value in examining organizational demography of

the top management team in future research (Beckman & Burton, 2011). One possibility, for

example, would be to de-emphasize a focus on psychological mechanisms and examine the

existence of roles and structures in TMTs over time, both within and between

organizations—answering perhaps a different set of questions that cannot be considered using

the psychological approach to examining these teams.

Team States and Processes

In research on nonexecutive teams, a significant amount of the “action” in predicting team

outcomes comes from the dynamics and interactions of team members, as well as the

emergent characteristics of the team. This emphasis on processes and team properties is not

particularly concerned with who the team members are, but is rather focused on carefully

describing the “state” of the team and how they interact. In the top executive team arena, this

topic has rarely been investigated and has rarely borrowed from advances being made by

teams researchers.

One of the ways that TMT research has begun to make some headway in

understanding team states and processes is through the broad construct of behavioral

integration, which is a construct that simultaneously encompasses a host of component team

states and processes (Simsek, Veiga, Lubatkin, & Dino, 2005). The construct of behavioral

integration is composed of three main indicators: the level of collaborative behavior in the

team, the quantity and quality of information exchanged, and the emphasis on joint decision

making (Hambrick, 1994) by the team. In other words, behaviorally integrated teams
collaborate and work well together, regularly share lots of nonredundant information, and are

collectively involved in the decision-making process. And behavioral integration does appear

to be important in predicting important outcomes. For example, using a sample of 96 service

firms, Carmeli (2008) found that TMT behavioral integration of top management teams was

positively related to perceptions of both human resource performance and economic

performance. Behaviorally integrated TMTs have also been found to positively contribute to

their organization’s capacity to pursue new strategic initiatives (Lubatkin, Simsek, Ling, &

Veiga, 2006) and are more able to implement transformations such as product innovations

(Hambrick, 1998). It appears that behavioral integration may be an important construct both

in its own right, and it also may be conceptualized as a key moderator of the relationship

between TMT characteristics and organizational outcomes (Hambrick, 2005; Ling, Simsek,

Lubatkin, & Veiga, 2008).

Similar to the findings demonstrating that the broad construct of behavioral

integration is beneficial, much (but not all) of the more fine-grained research on team process

has resulted in findings that are perhaps similarly intuitive. Teams characterized by a high

degree of each of cohesiveness, communication, and flexibility are generally taken to be

more effective and produce better organizational outcomes. For example, Peterson and

colleagues (2003) found that top management team flexibility and cohesiveness were

positively related to firm income growth; Iaquinto and Fredrickson (1998) found that TMT

agreement was positively related to firm performance (operationalized as ROA); and Ensley,

Pearson, and Amason (2002) found that TMT cohesiveness was positively related to new

venture growth. Despite these findings, we assert that these “positive” team processes may

not always be positive and may be dependent on characteristics of the environment and tasks

that need to be done. In top management teams where the nature of the work is such that

individual team members do not need to closely work together to get their work done (i.e., a
low degree of interdependence), a higher degree of cohesiveness and communication may

actually be detrimental to performance (Barrick, Bradley, Kristof-Brown, & Colbert, 2007).

Additional research would be beneficial in helping to untangle likely nuanced relationships

between team states and team processes with outcomes (discussed later in this chapter).

Core Leadership Concepts and Constructs at the Executive Level

Up to this point in the chapter, we have focused largely on research that comes out of the

strategic management tradition, and more specifically, the Upper Echelons perspective of

strategic management. But senior executive leadership can also be examined from a core

leadership perspective. Certainly, the nature of leadership at the executive level is

qualitatively unique from leadership and leadership phenomena at other organizational levels

(Day & Lord, 1988). but some of the processes and mechanisms of action may (and are likely

to) be similar across organizational levels. As such, an investigation of core leadership

constructs (such as authentic, transformational, and shared leadership) in the context of

executive leadership is informative. This cannot be the only path forward for executive

leadership, but certainly a clearer understanding of the applicability and nonapplicability of

core leadership constructs to the executive arena will help us develop a clearer picture of the

nature and parameters of executive leadership. And at the same time, it may also shed light

on and help to advance core leadership constructs.

A significant amount of core leadership research has emerged from organizational

behavior and micro-oriented perspectives (Waldman, Siegel, & Javidan, 2006). Most core

leadership research focuses on lower-level leaders influencing individual and group-level

outcomes, with very little attention to the role of executive leadership in explaining higher-

level organizational outcomes (DeChurch, et al., 2010; Yukl, 2008). Several recent empirical

papers have examined the nature and dynamics of executive leadership using core leadership

constructs (most notably, transformational leadership) as they relate to organizational strategy

and outcomes, but these types of studies are quite rare. Although we cannot presume

isomorphism of constructs and linkages at the executive level, some of the constructs and

linkages may be similar.

Executive Transformational Leadership

Of the empirical examinations of transformational leadership, several studies have examined

an overarching transformational leadership factor and in other cases, researchers have

separated out two of the components of transformational leadership: charisma and intellectual

stimulation. There appears to be building evidence that executive transformational leadership

(and the facets) is predictive of organizational-level outcomes. For example, using an

overarching transformational leadership factor, Resick and colleagues (2009) examined 75

newly appointed Major League Baseball team presidents and found that transformational

leadership of a newly appointed team president was positively related to changes in team

winning percentage and fan attendance in the following three years as compared with team

presidents who were lower in transformational leadership. Transformational leadership (as a

general factor) has also been linked to increased TMT effectiveness (Flood et al., 2000), and

visionary leadership has been linked to effort and organizational performance (Sully de

Luque et al., 2008).

Charisma. Charisma has been the most frequently examined component of

transformational leadership. In general, most studies have found a positive effect of CEO

charisma on organizational performance, but these effects may exist primarily (or be more

pronounced) under conditions of uncertainty when followers are thought to be more prone to

the influence of charisma (Weber, 1947). Both Waldman and colleagues (Waldman, Ramirez,

House, & Puranam, 2001) and Tosi and colleagues (Tosi, Misangyi, Fanelli, Waldman, &

Yammario, 2004) found that CEO charisma predicted organizational-level outcomes in

uncertain conditions, although Bacha (2010) found that CEO charisma predicted

organizational performance regardless of the uncertainty in the environment.

One of the biggest difficulties in determining charisma (which exists only as a

perceptual measure) is the complexity associated with disentangling the direction of causality

between the perception of charisma and performance. The evidence appears equivocal, thus

we need to be careful in asserting that the charisma-performance relationship is necessarily

unidirectional. On the one hand, Waldman, Javidan, and Varella (2004) found that CEO

charisma predicted profit margin and return on equity, and that these effects were not the

result of charisma perceptions being a function of prior performance. Agle and colleagues

(Agle, Nagarajan, Sonnenfeld, & Srinavasan, 2006), however, provide a more pessimistic

overall assessment by finding that CEO charisma was not predictive of a variety of

performance measures (stock return, ROA, ROS, ROE, and a perceptual measure of

performance), and that TMT perceptions of CEO charisma, rather, were a function of

previous organizational performance.

Intellectual stimulation. Another component of transformational leadership,

intellectual stimulation, has received significantly less attention, although it is likely to be

critical to the leadership process (Locke, 2003). Using a sample of 56 CEOs, Waldman,

Siegel, and Javidan (2006) found that CEO intellectual stimulation (as evaluated by senior

managers) was related to independent evaluations of corporate social responsibility. Their

suggestion was that intellectual stimulation involves encouraging others to question

assumptions and authority, to think complexly and innovatively about problems and their

solutions, and to consider the broader environmental context. In turn, this emphasis on

thinking about systems, stakeholders, and problems would help strategic actors in the

organization to first consider social responsibility issues, and then find solutions that balance

social responsibility and financial performance. Less intellectually stimulating leaders, on the
other hand, would fail to promote sophisticated thinking required to either consider or

develop effective and complex solutions to social responsibility issues that the organization

faces. It should be noted that they also examined the effect of charisma, but found no effect

for charisma on social responsibility performance.

In total, it appears that there is likely two-way causality operating between

performance and charisma—and that transformational leadership (particularly charisma and

intellectual stimulation) may result in better performance on some metrics. Conceptually

linking each of the components of transformational leadership to an appropriate outcome

measure is important, and future research that moves beyond the overarching

transformational component is likely to be more useful in helping to get a better idea of

specific leadership behaviors that influence various outcomes and in various contexts.

Other core leadership constructs. We know significantly less about the influence of

other leadership concepts and constructs at the executive level, but a few recent studies have

demonstrated their potential relevance. Wang, Tsui, and Xin (2011), for example, studied the

organizational performance impact of task versus relationship behaviors at the CEO level

using a sample of 125 Chinese firms, and Peterson, Galvin, and Lange (2012) found that

servant leadership was positively predictive of return on assets. Utilizing the concepts of both

shared leadership and authentic leadership—defined as an ongoing, mutual influence process

among top management team members that promotes a positive climate consistent with

members’ values and beliefs—the authors found that shared authentic leadership was

positively related to firm performance in new venture top management teams (Hmieleski,

Cole, & Baron, 2012). Given the breadth of leadership ideas and concepts that have proven to

be relevant in nonexecutive domains, these studies are the first that help to paint a more

complete picture of executive leadership.

Boards of Directors
Beyond CEOs and top management teams, boards of directors are another group that is part

of the landscape of executive leadership. A review of the vast and varied literature on boards

of directors and the effects they can have is beyond the scope of this brief section, but here

we describe some of the key features and functions of boards and some of the general

findings and approaches from research in this area.

Public companies and many other for-profit, not-for-profit, and educational

institutions are overseen by a board of directors, which is an entity that is separate from the

top management team, but involved in some critical organizational functions. Also referred to

as a board of trustees or board of governors in some instances (to name a few possibilities),

boards have varying degrees of responsibility in functions including: hiring and firing the

CEO; monitoring the environment for opportunities and threats; setting strategic direction;

providing advice and counsel to the CEO; approving major initiatives such as acquisitions

and divestitures; and ensuring that stakeholders are being fairly represented, including

attempts to align CEO and stakeholder interests through the setting of executive pay

(Arthaud-Day, Certo, Dalton, & Dalton, 2006; Daily, Dalton, & Cannella, 2003; Hillman,

Withers, & Collins, 2009; Zald, 1969).

Just as CEO and TMT individual difference variables have been shown to predict

firm-level outcome variables, the compositional make-up of boards are predictive of the

strategy and performance of an organization (Johnson, Schnatterly, & Hill, 2013). For

example, the gender composition, proportion of outside versus inside members, age, and

national origins of board members lead to differences in corporate social performance (Post,

Rahman, & Rubow, 2011).

One of the key distinctions between boards and the top management team is that

boards do not actively participate in the implementation of strategies and day-to-day

operations of the firm (Fama & Jensen, 1983). Their role is primarily limited to monitoring
and influence, although they sometimes play a more active role during crisis. Boards also

tend to be fairly large (i.e., average of 13 directors, whereas TMTs average 6 members) and

include members with potentially differing interests (e.g., insider directors versus outsider

directors) (Forbes & Milliken, 1999). They function only periodically, and are mostly

confronted with complex tasks. The output of their work is mostly cognitive, since they do

not concretely participate to the implementation of their recommendations.

With the board playing a primary role as overseer of the organization, the CEO, then,

must ultimately answer to the board of directors, or at least in theory. But in reality the

situation is not so simple. At the same time the CEO is required to be held accountable to the

board, he also sits on the board—oftentimes alongside several other full-time executives of

the organization, and can wield significant influence on the board in framing and guiding

information presented, discussions, and decisions. A CEO’s influence is particularly

enhanced when she also holds the position as chair of the board—a situation which can raise

significant questions about the true independence of the board. In 2004 in the United States,

74.3 per cent companies in the Fortune 500 had a CEO who was also chair of the board, and

as of May 2012, this percentage was lower but still a majority at 57.2 per cent (Lamb, 2012,

para. 5).

In addition to internal players on the board such as the CEO and other the top

management team members, boards also usually have members who are not full-time

employees of the organization. At a broad level, scholars have differentiated between inside

directors (i.e., the top managers of the firm), independent directors (i.e., representatives of

other organizations that do very limited or no business with the firm), affiliated directors (i.e.,

representatives of other organizations that conduct business with the firm), and family

directors (i.e., members of the founding family or relatives of top managers).

 The nature of the interplay between the CEO, other senior executives, and the board is

evolving and needs to be continually understood in the context of a rapidly changing

legislative environment (i.e., Sarbanes-Oxley Act of 2002 in the United States, the

Companies Act of 2006 in the UK) and general governance environment (Beck & Wiersema,

2011). The changes affect the nature, responsibility, and liability of the board—such that

boards, are generally required to be more active and are held more responsible than in the

past. Thus, research on boards of directors and their influence on organizations are

increasingly important.

Future Directions

Research on senior executive leadership has increased exponentially over the last several

decades, and we are starting to better understand the nature, mechanisms, and effects of this

unique form of leadership. Yet the phenomena we are trying to understand is highly complex

and multifaceted, and as such, acknowledgment of advances need to be tempered with

acknowledgment that there is significant work still to be done. We suggest seven possibilities

for future research that we believe hold significant promise for advancing the understanding

of executive leadership. These seven possibilities include issues and recommendations

spanning methodological and conceptual domains.

Future Possibility 1: Understand Executive Characteristics through the

Eyes of Others

Scholars interested in understanding the effect of executive individual differences on strategy

and performance variables have typically used self-report and proxy measures of

psychological characteristics (see Peterson et al., 2003, and Resick et al., 2009, for rare

exceptions), and have long lamented that there is significant difficulty in obtaining data from

senior executives (Cycyota & Harrison, 2006; Finkelstein, Hambrick, & Cannella, 2009).
Researchers should consider measuring a focal executive’s psychological characteristics

through ratings provided by familiar others who know the individual. There are at least two

potential advantages to obtaining information about an executive from a knowledgeable

other.

First, reports by knowledgeable others can be a valuable alternative source of data when

direct access to the executive is not possible. Second, and more important, collecting

information from knowledgeable others may usefully advance our understanding of senior

executive leadership beyond what is possible using only self-report and proxy measures

because of the unique information that others can provide. In self-reports of personality,

which have long been considered the gold standard in assessing psychological characteristics,

it is well known that individuals may intentionally and/or unintentionally distort their

responses because of both self-impression motives and/or an inability to properly describe

themselves (Paulhus, 1991). Other-reports are less prone to some of these sources of

distortion. Solid evidence for the potential benefits of other-reports of personality comes from

a large-scale meta-analysis of the predictive validity of other-rated Big Five traits in

nonexecutive work settings. Oh, Wang, and Mount (2011) found that other-rated Big Five

traits were more predictive of overall job performance than self-reported Big Five traits.

Further, they found that other-rated Big Five traits were incrementally predictive beyond the

effects of self-reported traits, suggesting that unique and valuable information is being

assessed beyond that resulting from self-reported personality. If this were to similarly be true

in the executive arena (and there is no reason to believe it would not be), reports of executive

personality provided by others may in fact be better in predicting outcomes than self-reports.

Future Possibility 2: Increased Emphasis on Validated (and Creative)

Proxy Measures
To circumvent the problem of access to personality data for senior executives, researchers

have often relied on “proxy” or indirect observable evidence that can be collected through

archival means including company reports of various kinds and purchased databases with

information about executives and companies. The standing of an executive on an underlying

personality trait is then inferred from this indirect and often biographical evidence. The

validity of the construct in measuring what we presume it is measuring, however, is not

always well understood.

Is narcissism appropriately measured by the prominence of the CEO’s photograph in

the company’s annual report, or their use of first-person singular pronouns (Chatterjee &

Hambrick, 2007)? Is having a pilot’s license a reflection of risk propensity/sensation seeking

(Cain & McKeon, 2012)? Certainly there appears to be good reasons to believe that the

underlying traits of narcissism and sensation seeking would be correlated with these proxy

measures, and attempts to provide some evidence for the validity of the construct are

occasionally made (see Chatterjee & Hambrick, 2007, for example). Yet, in many cases there

is very little evidence presented as to the validity of the inferences about the underlying

construct. Perhaps a pilot’s license also reflects a love of travel (and perhaps then openness to

experience) or need for control (the pilot does the flying so that someone else isn’t in

control)—indeed it could be reflective of all three of these underlying constructs to some

extent. In order to make appropriate inferences, then, caution needs to be taken in presuming

that a particular indicator is truly reflective of the variable of interest and not also reflective

of a variety of other potential variables. Simply having predictive validity (a relationship

between a proxy measure and an outcome) is not indicative that a measure is actually

measuring what we are inferring it to measure. Thus, to the extent that proxy measures in

executive leadership research do not provide construct validity evidence, they should be met

with caution.
 Providing validity evidence will require additional work by researchers, and may

include avenues such as demonstrating that an unobtrusive and/or proxy measure is highly

correlated to the proposed personality construct in a similar and accessible sample. For

example, as a starting point, a researcher interested in validating a proxy measure of

narcissism might use an accessible sample of practicing senior managers and measure both

their use of first-person pronouns and their scores on a well-known pencil-and-paper measure

of narcissism. To the extent that the proxy measure is correlated with the more established

pencil-and-paper measure, researchers can be more confident about what the proxy measure

if actually measuring. It would also be helpful to show that the proxy measure is not related

(or more weakly related) to similar psychological constructs.

If researchers were to take the idea of construct validity seriously, we believe

significant strides could be made in studying executive leadership. Once the construct

validity evidence for a proxy measure has been established in multiple studies, the measure

could be more confidently used in future research. This validation work is not likely to be

easy, and it is possible that our inferred underlying constructs are not as well represented by

our proxy measures as we currently believe (Resick et al., 2009). However, the potential

difficulty and messiness that may result from more validation of proxy measures does not

mean it should not be undertaken, as it is critical to the veracity of our assertions about the

role (or not) of psychological characteristics in executive leadership.

Future Possibility 3: Understanding the Influence of Emotions and

Emotional Capabilities

Affect and emotions—including the understanding and regulation of emotions, the

interpretation of emotions and affect in others, and using emotions for influence—are

important in the nonexecutive context, and may be particularly relevant in the executive

domain (Hodgkinson & Healey, 2011).

 One of the ways that affect, emotions, and emotion regulation may be critical in the

executive context is in decision making (Andrade & Ariely, 2009; Delgado‐Garcia & de la

Fuente‐Sabate, 2010), which is a major task of executive leadership. Senior executives need

to react to events, new ideas, and possible strategic paths, and make decisions among

alternatives—and oftentimes they have an automatic, gut reaction to those ideas. When those

reactions are based on emotional triggers, false beliefs and assumptions, or are clouded or

enhanced by an emotional state, they can significantly impact cognitive processes and

decision making (Daniels, 1999). Meta-cognitive capabilities, including the proper

understanding (self-awareness) and regulation of these emotional and affective states are thus

a valuable skill and capacity (e.g., Nelson, 1996; Ochsner, Bunge, Gross, & Gabrieli, 2002),

and we should not presume that all executives have similar tendencies and capacities.

Understanding an executive’s ability/tendency may thus help us predict their decision making

in both specific domains and in a global sense. From a prescriptive standpoint, emotional

awareness and regulation may be a skill that could be enhanced—such that an executive may

be able to learn to better identify a potentially problematic emotional state and actively

regulate it in order to maximize decision-making effectiveness (Barrett, 2007).

In addition to understanding decision making and strategic actions, examination of

affective states and emotions may also be critical in understanding dynamics of the

CEO/TMT interface and executive influence on organizational culture, as group dynamics are

influenced by emotion displays (Chi, Chung, & Tsai, 2011), and emotional abilities are likely

to be important in a leader’s ability to influence others (Coté & Hideg, 2011) and set the tone

for the organization. Certainly, the conditions that make the broad topic of emotions relevant

in nonexecutive work contexts (Elfenbein, 2007; Grandey, 2008) apply, perhaps even more,

in the executive context—thus we see this as an exciting and valuable avenue for future

research. Researchers may have to get creative in collecting data as some of the methods used
in this stream of research in nonexecutive settings (such as diary studies) are not likely to be

practical. Advances in collection of physical reactions from sociometric badge data (worn by

an executive) could be one possibility for future research (Olguín et al., 2009), as could

emotional coding of executive reactions by trained experts who can recognize subtle

emotional cues that an executive may give in public situations.

Future Possibility 4: Increased Sophistication in Theorizing—Interactions

and Nonlinear Effects

Explicitly conceptualizing and examining more sophisticated models with interaction and

curvilinear effects will expand understanding of executive leadership. Most of the executive

leadership literature that is focused on predicting strategic actions and organizational

outcomes has explored the substantive impact of single individual characteristics alone or in

interaction with situational characteristics. Not only have we left a number of potentially

interesting individual differences totally unstudied (such as performance/learning

orientation;DeRue & Wellman, 2009) but we could significantly benefit from more

sophistication in theorizing and modeling (Blettner, Chaddad, & Bettis, 2012). Outcomes of

interest are likely to be predicted by a combination of factors at various stages, and

curvilinear relationships may be present, although they are rarely conceptualized or tested.

Two recent examples point the way in terms of more sophisticated multivariate

theorizing, which we hope will become more commonplace. First, Nadkarni and Herrmann

(2010) examined all five of the Big Five traits simultaneously in a structural equation model

and found significant paths from each of the traits to strategic flexibility, and additionally

hypothesized and found evidence for an inverted-U relationship between agreeableness and

strategic flexibility. The second exemplar is from Zhang and colleagues (Zhang, Peterson, &

Reina, 2013), who found interactive effects of narcissism with both CSE and organizational

identification of the CEO.

 As an unstudied possibility, perhaps there’s an inverted U in the relationship between

conscientiousness and performance. A certain dose of conscientiousness will benefit firm

performance since the CEO needs to be diligent in assessing potential threats and

opportunities the firm is facing. However, at high levels, CEO conscientiousness may cause

the CEO to become too bogged down in details (one of the markers of conscientiousness) and

fail to prioritize properly. These effects may be more pronounced in large and rapidly

changing organizations, and they may be less pronounced (or take a different shape) when the

CEO has a chief operating officer. Many other possibilities for theorizing complex models

not only exist, but are necessary for enhancing our understanding of the realities of executive

leadership phenomena.

Future Possibility 5: Reframe the Study of Top Management Teams—

Team Emergent States, Leadership Capacity, Processes, Behaviors, and

Conditions

The meaning-making, decision, and action processes of executive leadership are often

affected by (and involve) the properties, processes, and interactions of the top management

team, and research has only begun to scratch the surface in understanding these dynamics

(Carpenter, 2011; Hambrick, 2007). We assert that gains in understanding leadership within

top management teams are most likely to come by reframing top management team processes

and differentiating team processes from team emergent states.

In their seminal paper on team process, Marks, Mathieu, and Zaccaro (2001)

differentiate between team processes and team emergent states. They define team processes

as the “interdependent team activities that orchestrate taskwork in employees’ pursuit of

goals” (p. 358), and they describe behaviors and actions such as: monitoring the progress

toward goals, strategy formulation, goal specification, team monitoring and back-up

behavior, conflict management, affect management, confidence building, and sense making.
On the other hand, emergent states characterize the team’s perceptions of the current state of

the team or the team’s attitudes, cognitions, motivations, capacities, and values and are a

product of a team’s experiences and previous processes. In this way, team cohesion and team

potency are not process variables but emergent states because they do not describe the nature

of member interactions but rather perceptions of the state of the team. Similarly, the

collective capacity for leadership within the team may also be an emergent state (Day, Gronn,

& Salas, 2004).

Some of the research being done in the domain of nonexecutive teams is likely to be

informative to our understanding of top management teams (see DeChurch & Mesmer-

Magnus, 2010; Mathieu, Maynard, Rapp, & Gilson, 2008), although the nature of the tasks,

the composition of the team, and other differences will need to be carefully considered

(Finkelstein, Hambrick, & Cannella, 2009). We realize that this avenue of research is quite

behaviorally specific in orientation, and data collection is not likely to be easy, but a

systematic conceptualization of top management teamwork that differentiates cognitive and

behavioral emergent states and team processes is likely to lead to more specific

understanding of some of the critical dynamics of top management teams. This behavioral

and specific focus also allows for conceptualization of leadership of and by the team as a

series of behaviors, or functions including composing the team, structuring and planning,

establishing expectations and goals, sense making, monitoring, solving problems, and

providing resources (Morgeson, DeRue, & Karam, 2010). These (and other) functions can be

performed by the CEO or by other individuals, or even collectively by the team (Hiller, Day,

& Vance, 2006).

If we begin to understand the behaviors and actions (i.e., team processes) and shared

emergent states that are critical drivers of top management team functioning,—we will be in

a better position to suggest interventions to the structure, resources, composition, and

behaviors of the team. And similarly, we may avoid focusing on non-causal remnants that are

not the key drivers of TMT success. For example, consider the emergent state of team

cohesion. If we focus centrally and blindly on cohesion, we are in danger of implying that

cohesion is the actual mechanism of importance, and thus may try to improve team cohesion

itself in order to enhance executive team performance. However, helping teams with specific

behaviors and processes may be a better locus for intervention (and investigation) than trying

to simply promote cohesion. Cohesion is likely to be a remnant, and not the actual cause of

team performance. Careful and sophisticated examination of team processes, although

difficult, would certainly be a useful avenue for understanding the context of executive team

leadership. In order to do so, researchers would need to borrow heavily from the increasingly

sophisticated research on teams and multi-team systems emanating from research traditions

outside of the management domain. At the same time that we are suggesting the need for an

informed fine-grained perspective in understanding teams, we are not suggesting

abandonment of work in the meta-construct of behavioral integration (communication,

collaborative behavior, and joint decision making). We view the broad construct of

behavioral integration as continuing to add value in helping to understand that the overall

state and process of an executive team is critical in a variety of ways to the strategic

functioning of an organization. Research on behavioral integration may give us clues about

where to look (and not look) deeper in order to understand top management teams. Where

behavioral integration is less valuable is in diagnosis of critical states, and specific behaviors

and actions.

Future Possibility 6: Differentiating TMT Members and Inner Circles

In executive leadership research focused on the top management team, the team has been

treated as an undifferentiated collection of equals. In reality, there is certainly

disproportionate influence of an “inner circle” or core within the top management team
(Mooney & Amason, 2011). If we are to seriously explore the possibility that top

management teams matter and hope to understand their processes, it is critical that we

identify and test multiple possibilities about where the locus of leadership is best

operationalized.

The first research issue in this domain is who should be considered to be a member of

the top management team (Jones & Cannella, 2011). Researchers have used many different

operationalizations of who is on the team, such as: the top two tiers of the organization’s

management, all the officers above the level of vice president, or the five highest paid

executives (Carpenter & Fredrickson, 2001; Carpenter et al., 2001; Wiersema & Bantel,

1992). Finkelstein and Hambrick (2005) suggested in survey research that scholars should

first ask CEOs who is in their TMT, and then send out questionnaires to those executives.

For certain strategic decisions or actions, with certain types of CEOs, in certain firms,

and in certain industries, it seems that the most-appropriate locus of analysis may differ.

What are the conditions under which the CEO may be the best locus of analysis? Does the

team matter less in the presence of a narcissistic and powerful CEO who is unlikely to listen

to others and is endowed with discretion to choose how she desires? The inner circle in a

given firm may be a starting point, but it may also depend on the nature of the strategic action

or outcome of interest. The chief human resource officer may have no impact on an

organization’s propensity to engage in acquisitions, but might be a critical actor when

studying organizational culture.

Determining differential relationships and influence within the top management team

may be partly related to the role (e.g., the chief operating officer is likely to be closer to and

more influential with the CEO than other team members), but also might be a function of

homophily and previous experience of an individual in working with a given CEO. If we

conceptualized the dyadic relationships between the CEO and team members as part of a
leader-member exchange process (Graen & Uhl-Bien, 1995), there may be implications for

understanding who has disproportionate influence and also who is likely to be an outlier.

Disproportionate influence and inner circles may be manifest in networks (Contractor,

Wasserman, & Faust, 2006), and sociometric badges and e-mail communication patterns are

two possible sources of data. Mapping this data with perceptions of relationship quality,

strategic decisions, and organizational outcomes could be particularly informative.

Examining the patterns of in- and out-flow of executives in organizations (and inner circles)

could also be informative (Beckman & Burton, 2011). These possibilities, however, will

require sociological and network perspectives and theories as opposed to the more

psychological perspective that has dominated much of the thinking about executive

leadership.

Conceptualizing the top management team as a monolithic structure with equal

participants is likely to hinder advances in understanding top management teams, and

subsequently, will likely limit our understanding of their influence on strategy, culture, and

performance outcomes. Recognizing channels of disproportionate influence and

differentiated relationships are likely to help us understand the foci of leadership most

appropriate for a given phenomenon, be it the CEO, the top management team, or inner circle

of disproportionate influence.

Future Possibility 7: Focus on Executive Skills, Abilities, and

Development

We know relatively little (from an empirical standpoint) about the development of executive

leadership, both before an individual reaches an executive role and after they are in the role

(Zaccaro, 2001). What, if any, are the skills and abilities of executive leadership that can be

developed? How can these skills and abilities be developed? Is it through life or work

experiences, enhancement of self-awareness, training sessions and seminars, or other means?

 In order to start to understand development, it is requisite that careful attention is

given to research findings about factors related to executive success, both globally and in

different industries, governance conditions, countries, and when considering different criteria

of success (to name a few of the possible contingencies discussed in this chapter). From an

understanding of what is required of successful executive leadership, we may then start to

think about development and observe how it occurs, as well as seek to intervene. Executives

have effects on other executives, teams, and the entire organization, and certain

characteristics, skills, and abilities that are effective for one level and with one criteria may

not be effective for the other (Hiller, DeChurch, Murase, & Doty, 2011)—so we may

discover some skills and behaviors that apply across all levels, but there is also likely to be

significant nuance in what is both recommended and possible at executive levels in

comparison to nonexecutive leadership development.

Our understanding of dispositional traits and their effects could be of some value in

development if executives can become more self-aware of their tendencies to incorrectly act a

certain way or make certain decisions, and then design workaround solutions. Skills and

abilities, on the other hand, may be better candidates for development to the extent that they

are more likely to be trainable or developable. For example, getting buy-in from others,

thinking more systemically, and emotional regulation are better candidates for development

than any type of intervention involving a personality trait. There is often a fine line between

the conceptualization of a disposition and a skill, but a focus on skills and abilities inherently

allows for more possibilities for development than dispositions and traits, which are largely

immutable.

Only recently have scholars begun to systematically investigate the process and

trajectories of leadership development of managers (e.g., Day & Sin, 2011, Dragoni, Tesluk,

Russell, & Oh, 2009) and have demonstrated that gains in competencies and effectiveness are
not simply a result of tenure, but that individuals differ in their growth trajectories. Part of an

individual’s growth trajectory may be open to systematic intervention, and some differences

in growth may be due to more stable interindividual differences. To the extent that some

individuals by nature are simply likely to keep developing as leaders, this may then shift the

emphasis away from emphasizing leadership development interventions by others, and shift

the focus toward selection of executives who are inherently focused on development.

In sum, an understanding of the possibilities, limits and trajectories of executive

leadership development is sorely needed. If general leadership development is an unspoiled

section of land waiting to be better mapped, then executive leadership development is a piece

of that land that surveyors have not yet seen.

Conclusion

Significant progress has been made in understanding the nature of executive leadership

despite the difficulty in gaining direct access to primary data from senior executives. Our

review here attempts to summarize and synthesize large swaths of this research (with a

particular emphasis on recent research) and to suggest a number of paths forward for future

investigation, but by no means should this review and our recommendations be considered

exhaustive in breadth or depth.

In many respects, the understanding of executive-level leadership has come a long

way since Day and Lord’s (1988) admonition that researchers explicitly consider executive

leadership as an important domain in its own right and thus in need of unique theoretical and

empirical attention—yet there is considerable room and need for more research and more

researchers to contribute to the discussion. In addition to the possibility for understanding

organizational strategy, culture, and outcomes, increased theorizing and research attention on

executive leadership has significant potential to also inform general leadership theories and
approaches, our understanding of boundary conditions of leadership (such as discretion and

situational moderators), and mechanisms of leadership impact.

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