Big-headed CEOs could be partly to blame for the type of tax sheltering the U.S. is now going after, new research suggests.
A paper published last week in the Journal of the American Taxation Association suggests that companies with relatively narcissistic CEOs are 3.9 percent more likely to seek out and use corporate tax shelters than firms with low-narcissism CEOs. The research joins a growing field of study examining individuals' behavioral tendencies and their effects on corporate policies.
"Pulling out the characteristics of the firms, having a narcissistic CEO as opposed to a non-narcissistic CEO, they will have influence on the tax policy," said Kari Joseph Olsen, an assistant professor at Utah State University and a co-author of the paper. "We found that they indeed have a 2 to 3 percent lower tax rate."
The authors used a measure of narcissism that was developed for previous studies. The composite index (NarcScore) includes relative cash and noncash pay in addition to the prominence of the CEO's photograph included in the firm's annual reports. A CEO whose picture occupies a whole page in the report scores higher in that regard than one photographed in a group or a picture that takes up less than half a page, for example.