The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Here’s an excerpt from this Forbes article:

To put together their paper, “Beauty is Wealth: CEO Appearance and Shareholder Value,” Halford and Hsu used a website called Anaface.com, which measures facial geometry, prizing symmetry and particular ratios for nose and mouth width. They loaded photos of 677 chief executives into the site and then measured their companies’ share performance at various points, like the days immediately following a CEO’s appointment. They also looked at how company stock performed during the period following a CEO’s appearance on television and compared that with share performance after a corporate news announcement that didn’t include any video coverage.

They also analyzed 1,830 merger and acquisition deals between 1985 and 2012 and found that more attractive CEOs negotiated better terms for their companies than did average-looking CEOs. “The evidence thus suggests that more attractive CEOs receive more surpluses for their firms from M&A transactions, a finding consistent with the hypothesis that more attractive CEOs improve shareholder value through superior negotiating prowess,” says the paper.

In a New York Times piece today, Andrew Ross Sorkin writes that Yahoo chief Marissa Mayer is among the top 5% of good-looking executives, scoring 8.45 out of 10 on Anaface’s Facial Attractiveness Index (F.A.I.). By comparison Paul Jacobs, the average-looking CEO of Qualcomm scored 8.19. Angelina Jolie scored 8.5 and Brad Pitt, 8.46. Sorkin, who was in touch with Halford and Hsu via email, writes that the authors told him that the average CEO scored just 7.3.

Yahoo’s share price has soared since Mayer took over the top job, rising from $16 to $40. But how much does that have to do with Mayer’s good looks and how much is a result of the changes she has made at the company? The paper and the authors don’t say.

Sorkin also writes about a 2013 study showing that hedge fund managers whose photos people viewed as more trustworthy were able to bring in more funds. On the other hand, that study found that those same managers performed worse and generated lower returns than less-trustworthy-looking managers.

What are shareholders and boards of directors to conclude from the paper? It seems to verify all of those other studies that show that attractive people have advantages over plain or unattractive people. But the paper looks at short-term performance, like stock movements right after a CEO appointment and directly following a TV appearance, and terms negotiated in a merger or acquisition. But what about the long-term performance of companies run by good-looking bosses versus firms run by average or unattractive CEOs? While good-looking CEOs may make more money and send their company stocks higher following media appearances, it obviously takes a lot more than looks to maximize a company’s value.