When a board of directors sits down to decide how much to pay a chief executive, they weigh the obvious things: company size, profits, stock performance, years of experience. But what if something less tangible also shapes that number? What if the way a CEO talks, thinks, and relates to other people, the stuff psychologists call personality, quietly helps determine whether they take home $5 million or $15 million a year?
A team of researchers decided to test that idea by mining an unusual source of data: the Twitter accounts of hundreds of corporate chieftains. Writing in the Review of Quantitative Finance and Accounting, they report that two specific personality traits, agreeableness and conscientiousness, are linked to noticeably higher executive pay. The reason, they suggest, is that CEOs with those traits tend to run companies that invest their money more wisely.
A question hiding in plain sight
Economists have long argued that talented CEOs should earn more, because their decisions ripple through an entire organization. The tricky part has always been measuring talent. Managerial ability can be estimated from financial statements, but personality, the softer side of leadership, has been harder to pin down.
Yao Du of Hangzhou Dianzi University, along with collaborators from Fordham University, National Yang Ming Chiao Tung University, and National Taipei University, set out to fill that gap. Their research question was straightforward: do CEOs with certain personality profiles get paid more than their peers, and if so, why?
To frame the investigation, they used a widely accepted model in psychology called the Big Five. It breaks personality into five dimensions. Openness describes curiosity and a taste for new experiences. Conscientiousness captures discipline and a drive to get things done. Extroversion reflects sociability and assertiveness. Agreeableness refers to cooperativeness and warmth toward others. Neuroticism covers anxiety, moodiness, and emotional instability.
Reading personality from a timeline
Measuring the Big Five in busy executives is not easy. You cannot hand a survey to the CEO of a Fortune 500 company and expect it back. So the researchers turned to something CEOs produce on their own: tweets.
They identified 369 Twitter accounts belonging to CEOs of S&P 1500 firms and downloaded 208,050 tweets. They then fed those tweets into IBM’s Watson Personality Insights, a tool that analyzes word choice to estimate where a person falls on each of the Big Five dimensions. Watson needs at least 3,000 words per person to produce reliable scores, which trimmed the final sample to 287 CEOs tracked between 1996 and 2019.
Why tweets and not, say, earnings call transcripts or annual reports? The authors argue that Twitter is more personal and less scripted. Executives tend to tweet about daily life, and the platform’s old 140-character limit forced them to choose precise, revealing words. Formal corporate communications, by contrast, are filtered through lawyers and public relations teams.
The team then paired each CEO’s personality scores with detailed financial data on their companies, including total annual compensation, firm size, profitability, stock returns, debt levels, and board structure. They also pulled in a separate measure of managerial ability developed in earlier academic work, so they could account for raw skill and isolate the role of personality.
Which traits paid off
After running statistical models that controlled for firm characteristics, CEO characteristics, industry effects, and year effects, a clear pattern emerged. CEOs who scored high on agreeableness and conscientiousness earned more than their peers. A one-percent increase in agreeableness was linked to roughly a 0.3 percent bump in total pay, and a one-percent increase in conscientiousness was linked to nearly a one percent bump. Openness, extroversion, and neuroticism showed no statistically significant relationship with compensation once other factors were accounted for.
Personality alone, the analysis showed, could explain roughly a quarter of the variation in how much S&P 1500 CEOs are paid.
To strengthen the findings, the researchers ran several additional tests designed to rule out coincidence or hidden variables. They used a technique called propensity score matching, which pairs companies with high-scoring CEOs to otherwise similar companies with lower-scoring CEOs. They also used an instrumental variable approach, leaning on the observation that industries focused on climate or employee welfare tend to attract more conscientious or agreeable leaders. The pay patterns held up.
Why firms seem to pay for these traits
The researchers then asked what these CEOs actually deliver. The answer, according to their models, is better use of company money.
Companies led by highly agreeable or highly conscientious CEOs were less likely to underinvest, meaning they were less likely to pass on projects that could generate positive returns. Those same companies also showed higher future profitability, measured by Tobin’s Q (a market-to-book valuation ratio), return on assets, and profit margin.
In other words, the link between personality and pay appears to run through performance. Agreeable and conscientious CEOs run tighter, more efficient operations, and firms reward them accordingly.
The pay premium was not uniform across all companies. It was larger at firms with stronger operating performance, faster growth, and more competition in their product markets. It was also larger in states with higher rates of labor unionization, a somewhat counterintuitive finding given past research suggesting unions tend to hold down executive pay.
When the authors broke agreeableness and conscientiousness into finer subtraits, they found that cooperation, trust, achievement drive, and self-discipline were the specific qualities most strongly tied to higher compensation.
What to take from it, and what not to
For boards and compensation committees, the findings offer a new angle on a very old question. Personality, typically treated as a soft consideration in hiring and pay decisions, appears to track measurable differences in how well executives steward company resources. For executives themselves, the results suggest that traits cultivated over a lifetime, such as reliability and the ability to work well with others, have financial value in the labor market.
A few caveats are worth keeping in mind. The study is based on CEOs who use Twitter actively, which is not a random slice of corporate leadership. The personality scores come from an algorithm analyzing text, not from clinical assessments. And the analysis identifies statistical associations rather than proving that personality causes higher pay. Even so, the research offers a data-driven look at something usually left to intuition: the quiet influence of character on the executive paycheck.
