Add the boardroom to the list of places where looks matter.
Attractive CEOs get a “beauty premium” in their earnings, boost their company’s stock performance when they take on the job, and get better deals in takeover negotiations, says a new study from two economists at the University of Wisconsin.
In a research paper titled “Beauty is Wealth: CEO Appearance and Shareholder Value,” economists Joseph Halford and Hung-Chia Hsu ranked the attractiveness of 677 CEOs of S&P 500 companies.
They found that more attractive CEOs not only see higher total compensation, they also help boost the price of their company’s stock in their first days on the job.
“This result provides the first piece of evidence that CEO appearance affects shareholder value and that more attractive CEOs seem to gain a ‘first impression’ advantage in stock prices,” the study says.
To make sure it’s physical appearance and not other factors that are boosting the stock price, Halford and Hsu looked at CEOs’ TV appearances versus mentions in non-TV news.
“More attractive CEOs are associated with better stock returns on CEO-related television news days,” the study concluded, but with non-TV news events, “CEO appearance shows no significant impact on stock returns.”
But how did the researchers determine who’s hot and who’s not in the first place?
They left that up to science, using the Facial Attractiveness Index from Anaface.com, a website that ranks attractiveness by looking at a person’s facial geometry, as well as other factors that research has shown determine perceptions of beauty.
In an interview with CNBC, Halford and Hsu gave the example of Yahoo! CEO Marissa Mayer.
"She scored 8.45 (out of 10) in our facial attractiveness index and is among the top 5 percent (best-looking) in our sample," they wrote. "Yahoo has been doing well since she became the CEO (about 158 percent increase in stock price).”
The researchers stress this doesn’t mean all the stock increases came from the CEO’s attractiveness.
"We just find that there might be some positive correlation between the two."
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