By J Katherine Bahr

CEOs have long been criticized for their tendency toward the dark triad of personality traits: narcissism, psychopathy and Machiavellianism. Ample research shows that dark triad traits endanger profitability and productivity in myriad ways. So why are they so common in business management—nearly three times more prevalent on corporate boards than in the general population?

Perhaps because there are business upsides to dark personality traits that we haven’t yet explored. That’s the theory behind a new study published in the Strategic Management Journal on Machiavellian CEOs. It reveals that Machiavellian CEOs create distinct advantages for their organizations in key negotiations, lowering acquisition premiums 12.11% and creating a net income savings of 6.6% in lower production costs and debt financing.  

How to Measure Machiavellianism in CEOs

Because self-assessments for negative personality traits are notoriously inaccurate, researchers relied on public video of 198 CEOs at S&P 500 firms from 2000 to 2011 to measure Machiavellianism. Trained psychology professionals evaluated the videos using an established scale and identified the instances and intensity of Machiavellian traits. Although the sample had a higher occurrence of Machiavellianism than the general population, researchers were still able to create a continuum showing how “high Machs” compared to their peers.

Machiavellianism’s Effect on the Costs of Goods and Financing

One of the study’s biggest hurdles was establishing whether CEOs can influence financial and operational costs or if these costs are determined solely by the market. The theory at play was that Machiavellian CEOs would distrust initial cost quotes and seek to negotiate better deals. However, in a pure market economy, their efforts would be in vain. Researchers ran multilevel modeling across four sets of corporate and financial data to establish CEO cost influence, and the results were striking: a 32.3% CEO effect on production costs and 22.3% effect on financing.

Researchers then compared how CEOs across the Machiavellian spectrum faired on production and financing costs in 1,354 representative firm years. Companies with high Mach CEOs paid $101.19 million less on goods sold and $35.8 million less on debt interest, representing a total of 6.6% savings on the average company’s net income. While CEOs clearly weren’t negotiating every deal, researchers explained that high Mach expectations and behaviors filtered down to create a bargaining culture at companies.

The Benefits of Machiavellian Acquisition Negotiations

Researchers also sought to measure how high Machs performed against their peers in acquisition negotiations, where CEO influence is clear. Because CEOs control every stage of acquisitions from selecting the targets to negotiating the final deal, it should be no surprise that CEOs with a Machiavellian focus on bargaining pay less on acquisition premiums. Examining 186 acquisitions in the 10-year time period, the study found that companies with high-Mach CEOs paid 12.11 % lower acquisition premiums, representing approximately $157 million or 3.6% of the average deal. Because of their inherent distrust in other people, Machiavellian CEOs gather more bargaining information which they leverage in social interactions and coalitions and to manipulate the deal to their advantage.

Are Machiavellian CEOs Good for Business?

This study shows that clearly in some instances, Machiavellianism is good for business. But the authors note that while high Mach CEOs seem to lower company costs, this might not outweigh the risks of the personality trait. However, the study might help explain why this dark personality trait can be found so often in CEOs, considering business management’s decades-long focus on cost reduction.

Find a full explanation of the study and how Machiavellian behavior in CEOs can benefit business costs in the full text, available in the Strategic Management Journal.

Based upon:

Recendes, T., Aime, F., Hill, A.D., & Petrenko, O.V. (2022). Bargaining your way to success: The effect of Machiavellian chief executive officers on firm costsStrategic Management Journal

J Katherine Bahr is a Knoxville-based freelance writer and content marketer with an advanced degree in creative writing and a decade working in publishing and marketing.

Published Date
03 June 2022

Article Type
Article Press Release, Article Summary/Abstract


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