Narcissism, director selection, and risk‐taking spending

This study introduces theories on personalities into governance research on director selection and CEO-board relations and explains why new directors favored by CEOs may indeed be more supportive of the focal CEO’s decision making, strengthening the positive relationship between CEO narcissism and risk-taking spending.

Abstract

We explain why CEO s favor new directors who are similar in narcissistic tendency or have prior experience with other similarly narcissistic CEO s. Because powerful CEO s are more able to select such individuals onto their boards, CEO power is predicted to be positively associated with the above characteristics of new directors. These associations are expected to be stronger when a new director is more different from the CEO in salient demographic characteristics. Moreover, we explain why new directors favored by CEO s are more supportive of their decision making, strengthening the positive relationship between CEO narcissism and risk‐taking spending. Our findings provide considerable support for our theory. This study introduces personality theories to corporate governance research on director selection and to research on how triads influence dyadic relations . Copyright © 2014 John Wiley & Sons, Ltd.