How narcissistic CEOs put companies at risk

Narcissists are generally self-centered, arrogant, thin-skinned and hostile when challenged. They often lack empathy and exploit others for their own gain.

Anyone with these traits is exasperating. But having a leader who's a narcissist can have long-lasting negative consequences.

Newly published research from Stanford University and the University of California at Berkeley finds self-obsessed CEOs are more likely to get their company named as a defendant in lawsuits. And they're not inclined to settle, even when their chance of winning isn't strong, dragging out the time and cost of the suit.

"People high on the narcissism scale are less sensitive to risk," said Jennifer Chatman, a professor of management at the Berkeley Haas School of Business and one of the researchers on the study.

They also tend to discount negative feedback and are overly confident in their judgment.

Chatman said the lawsuits brought during a narcissistic CEO's tenure usually aren't over headline-grabbing issues so much as basic business practices, like accounting irregularities or patent infringement.

That may be because narcissistic CEOs are more likely to bend the rules and create "low-integrity" corporate cultures that often outlast their tenure, as additional studies by Chatman and others have found.

And they tend to reward loyalty over expertise in appointing deputies, ensuring that they are less likely to get truthful information, she said.

So why do narcissists get hired in the first place?

They are often highly confident and can paint a very appealing picture of the future, which are viewed as traits needed to spur teams to success.

Prior research from the University of Pennsylvania and University of California at Berkeley suggests the corporate playing field may be tilted in favor of narcissists seeking power. They interview well, and their overconfidence can sway search committees.

"We have trouble distinguishing between leadership and narcissism," Chatman said.

That's why she advises boards seeking a CEO to look beyond their performance record and charisma. She recommends talking to their direct reports to get a better read on their behavior over time, since the darker side of narcissism may take awhile to emerge.

Narcissists can show themselves to be hypersensitive when their decisions or authority are challenged.

And they will hog the spotlight of success.

"Narcissists are likely to exhibit problematic interpersonal behavior, such as claiming more credit for positive outcomes while failing to give credit to others," Chatman said.

Not only is that exasperating to talented team members who deserve credit, it's demoralizing.