Research: Why CEOs Shouldn’t Take All the Credit

There are countless factors that can lead CEOs to be blamed for their companies’ poor performance, many of which are outside their control. Our recent research, however, suggests that how leaders present themselves plays an important role. Through an analysis of 23,000 media articles about more than 350 CEOs, we found that when CEOs credit their strategic decisions for unexpected positive earnings, they are more likely to be blamed for negative results in the future (and more likely to be fired as a result). Conversely, when leaders are humble and take less credit for positive outcomes, they are less likely to be blamed or removed from their positions when earnings fall. This effect is primarily driven by a psychological phenomenon known as anchoring. When a CEO pushes the narrative that their strategic choices, rather than external factors, are responsible for their company’s positive performance, analysts and board members are more likely to assume that negative performance later on is also the result of the CEO’s strategic choices — that is, their assumptions around who’s to blame for the negative performance are anchored in their initial attribution of credit. These biased judgements can have an outsized influence on the views of the media and the general public, and once perceptions about a CEO have soured, boards are much more likely to give in to public pressure to dismiss the CEO than to base their decisions on a fair, comprehensive review of the CEO’s entire tenure. The forceful CEO who is seen as singlehandedly saving the company can, a few years later, be viewed as singlehandedly responsible for its failure, regardless of extenuating circumstances. Thus, to avoid setting themselves up for failure, our research suggests that leaders should adopt a long-term approach to impression management. Taking the lion’s share of credit for your company’s successes may be tempting in the moment (especially if your compensation is largely tied to self-reported updates), but this strategy can quickly backfire when the tides turn against you. Plus, prior research suggests that more-humble CEOs enjoy better market performance and more positive relationships with both fellow executives and middle managers — so there’s more than one reason to err on the side of humility. In addition, our research also highlights that analysts and board directors tend to rely heavily on what CEOs say in constructing their own narratives, and their early impressions often solidify into lasting beliefs that may color their judgements for years to come. Of course, in an ideal world, analysts and boards would evaluate CEOs carefully and holistically, balancing past and present performance and acknowledging the impact of external factors rather than falling prey to biased perceptions or media pile-ons. Unfortunately, Wall Street’s tendency to prioritize short-term performance has fostered a culture that’s prone to cognitive shortcuts — and in which boards are quick to fire a CEO as soon as public opinion turns. Moreover, these issues are often further compounded by other biases that can interfere with people’s ability to evaluate CEO performance fairly. Research has shown, for example, that women and minority CEOs are subject to greater media scrutiny and criticism than white male CEOs. It’s up to boards, analysts, and the media to recognize these biases and work to reduce their impact on how CEOs are evaluated. But at the same time, CEOs looking to achieve long-term success would be wise to get ahead of the cognitive biases that are likely to influence how they’re perceived — especially those, like the anchoring bias, that are at least somewhat in their control. While it’s only natural to want to take credit when things are going well, our research suggests that a little humility up front will pay dividends if and when things start to take a turn for the worse.

Research: Why CEOs Shouldn’t Take All the Credit

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