Would You Be a Greedy CEO? Here's How to Tell

Gordon GeckoIt's difficult to open a paper these days (or, turn on your laptop or smartphone, if that's how you get your news) without reading about a new and reprehensible instance of CEO greed. Most are tales of golden parachutes received after nearly running a company into the ground, or huge bonuses paid out in a year when hundreds of employees lost their jobs. Occasionally, there's a real doozy--remember when John Thain, former CEO of Merrill Lynch, spent over a million dollars redecorating his office? Or when former Tyco CEO Dennis Kozlowski bought a gold-plated trashcan on the company's dime?

Obviously, most CEO's do not behave this badly. But how can we understand the behavior of the ones who do, and anticipate when a leader might be particularly likely to go the Way of the Golden Trashcan? In other words, when is a leader most likely to be self-serving, rather than focused on what's best for the company (or, for more mid-level leaders, their group within the company)? And how can each of us tell which type of leader we are, or might someday be?

The answer is an important one, since self-serving leaders are often ineffective leaders. By allocating more resources to themselves (pay increases, bonuses, office space, credit and recognition, etc.) and less to their group, and by focusing on their own goals rather than group goals, greedy leaders undermine employee loyalty and motivation. Their self-serving ways have been known, on occasion, to bring an entire company to its knees.

You might think that power itself is to blame - that more powerful leaders are inherently more likely to hog resources than less powerful ones. But it's not that simple. Recent research suggests that both low and high-powered leaders can make self-serving decisions, but that they do so for very different reasons.

High Power Leaders: Research shows that being in a position of power makes people generally less sensitive to what's happening around them (e.g., input from others, social norms) and more sensitive to their own internal states and feelings.

Powerful people care less about what others think of them, and become demonstrably less adept at correctly assessing other people's feelings and perceptions. (Interestingly, even people in very temporary positions of power show these same effects--there's something about power that seems to immediately turn our vision inward).

In particular, research shows that very powerful leaders tend to be swayed by their personal beliefs about what an effective leader is like.

If your idea of an effective leader is someone who pursues their own goals and ambitions at the expense of the group, takes full advantage of their status and perks, and invests little of their personal time or effort into helping their employees, then being in a position of power is quite likely to turn you into self-serving leader. If you're fortunate enough to be made a CEO, there is probably some gilded office furniture in your future. Good luck with that.

If, instead, your idea of an effective leader is someone who is more concerned with whether or not the group is effective, puts group goals ahead of their own, gives up perks, and invests time and effort in tasks that benefit their employees, then power won't turn you greedy--in fact, you'll probably be generous and attentive to others. And the really good news is, your beliefs about effective leaders are correct--leaders who focus on their employees, rather than themselves, understand what leadership is all about and are more successful because of it.

Low Power Leaders: Mid-level leaders, on the other hand, are less likely to use their own beliefs about effective leadership as guides, and are more strongly influenced by external cues, like information about their own and their employees relative performance. When low power leaders believe they have outperformed their employees, they feel entitled to more benefits, and make more self-serving decisions with regard to recognition, perks, and pay. When their employees have superior performance, they spread the benefits around accordingly.

Often, it's only when an individual is promoted from a position of relatively lower power to one of high power that we begin to see their true colors, so to speak. Only then does their mental image of an ideal leader begin to influence their own leadership behavior in tangible ways. Corporate Boards would be very wise to try get a sense of a CEO candidate's beliefs about great leaders, because the behavior the candidate admires is exactly what the Board, and the employees, are going to get.

For reference:

Rus, D., et al., Leader power and leader self-serving behavior: The role of effective leadership beliefs and performance information, Journal of Experimental Social Psychology (2010), doi:10.1016/j.jesp.2010.06.007

CEOs Behaving Badly

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1 Comments

  • Juan Ortiz

    Decision-making is the most difficult part of being a leader, on any level. I believe the ability to listen, as well as to think in the long-term implications of our actions, is what separates great management from greedy management. Nobody knows how a decision will affect your company better than those who work for it. Their input is just as important as your expertise.

    Of course, you make the final call; yet it is better to make that decision with points of view of everyone affected by it, both short and long term.