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Does Ceo Charisma Matter? An Empirical Analysis Of The Relationships Among Organizational Performance, Environmental Uncertainty, And Top Management Team Perceptions Of Ceo Charisma


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This article reports the results of a study examining the relationships among strategic charismatic leadership, organizational performance, and environmental uncertainty with primary data from a sample of 128 CEOs of major U.S. corporations. Drawing on 770 surveys from top management team members in these companies, objective stock market and accounting data, and an objective measure of environmental uncertainty, we found that organizational performance was associated with subsequent perceptions of CEO charisma but that perceptions of CEO charisma were not associated with subsequent organizational performance, even after we incorporated the potential moderating effect of environmental uncertainty.
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Bradley R. Agle
Katz Graduate School of Business
University of Pittsburgh
Pittsburgh, PA 15260
(412) 648-1571
(412) 648-1693 FAX
Nandu J. Nagarajan
Katz Graduate School of Business
University of Pittsburgh
Pittsburgh, PA 15260
Jeffrey A. Sonnenfeld
Yale School of Management
Yale University
New Haven, CT
Dhinu Srinivasan
Katz Graduate School of Business
University of Pittsburgh
Pittsburgh, PA 15260
This article is an updated version (based on an expanded time period and further measures) of the
first author’s doctoral dissertation, a portion of which appeared in the 1994 Academy of
Management Best Paper Proceedings. The authors would like to thank the following individuals
for their help on this project: Charles Hill, Tom Jones, Patricia Kelley, Paul Collins, and Bob
House. Financial resources were provided by Accenture, the David Berg Center for Ethics and
Leadership at the University of Pittsburgh, and the Chief Executive Leadership Institute at Yale
University. We would also like to thank the Associate Editor and three anonymous reviewers
for their insightful comments.
This article reports the results of a study examining the relationships among strategic charismatic
leadership, organizational performance, and environmental uncertainty with primary data from a
sample of 128 Chief Executive Officers (CEOs) of major U.S. corporations. Based on 770
surveys from top management team members (TMT) in these companies, objective stock market
and accounting data, and an objective measure of environmental uncertainty, we found that
organizational performance is associated with subsequent perceptions of CEO charisma, but that
perceptions of CEO charisma are not associated with subsequent organizational performance,
even after incorporating the potential moderating effect of environmental uncertainty.
Are charismatic CEOs associated with better organizational performance than their less-
charismatic counterparts? The academic literature has identified the importance of strategic
leaders and in particular, the CEO, as a determinant of organizational performance (e.g.
Hambrick, 1989; Finkelstein & Hambrick, 1996). Meanwhile, leadership researchers have
demonstrated that charismatic leaders can be more effective than their less-charismatic
counterparts (e.g. Bass, 1985; Howell & Frost, 1989; Koene, Vogelaar, & Soeters, 2002). A
meta-analysis of studies of charismatic leadership found that it is consistently related to various
measures of leadership effectiveness (Lowe, Kroeck, Sivasubramaniam, 1996). While most of
this research has been performed at lower levels of management, leadership theories (Conger &
Kanungo, 1987; Pawar & Eastman, 1997) have suggested that the same phenomenon might be
seen at the strategic level of leadership as well. However, several authors have suggested that a
potential downside to charismatic leadership in terms of organizational performance could arise
because of the frequent association between charisma and dysfunctional forms of narcissism
(Conger & Kanungo, 1998; Maccoby, 2000; Sankowsky, 1995).
Empirical evidence on the relationship between CEO charisma and organizational
performance is mixed. Waldman, Ramirez, House, and Puranam (2001) found no direct
relationship between CEO charisma and subsequent organizational performance as measured by
net profit margin, but found that CEO charisma predicted organizational performance when
managers perceived the environment to be more uncertain. Similarly, Tosi, Misangyi, Fanelli,
Waldman, and Yammarino (2004) found no direct relationship between CEO charisma and
organizational performance as measured by shareholder return or return on assets, but found a
positive moderating effect of perceived environmental uncertainty for the relationship between
CEO charisma and shareholder return. Finally, unlike the other two studies, Waldman, Javidan,
and Varella (2004) found that CEO charisma is related to subsequent organizational performance
as measured by net profit margin and return on equity, but found no support for a moderating
effect of perceived environmental uncertainty.
Table 1 provides a summary of the similarities and differences across these various
studies, contrasted with the study reported in this article. The similarities in these studies include
investigation of the same general research question (i.e. the effect of CEO charisma on
organizational performance), the type of informants (i.e. TMT members), and the nature of the
sample (i.e. Public U.S. and Canadian firms). However, there are many differences, including
the sample size, number of participants, response rates, measures, and timeframes. For example,
the current study differs from the rest in the instrument used to measure CEO charisma and the
measure of environmental uncertainty. The current study uses a variety of organizational
performance measures and similar to Waldman et al. (2001), employs a pre- and post-survey
design with multiple controls.
There are several potential explanations as to why the results of prior research are mixed.
First, as mentioned by these authors, two limitations of their studies are small sample sizes and
low number of responses per firm. This is because primary data on CEOs is very difficult to
collect. Second, theories of this complex relationship have argued for a number of mediating and
moderating variables (Canella & Monroe, 1997; Waldman & Yammarino, 1999), many of which
are also difficult to disentangle, measure, and test. Third, methodological differences may
contribute to the mixed findings. The different results of prior studies could also be the product
of the different measures of organizational performance employed in the research. For example,
Waldman et al. (2001) use just one measure, an accounting measure of performance. Also, Tosi
et al. (2004) and Waldman et al. (2004) did not control for prior organizational performance,
although earlier research (Waldman et al., 2001; Virany, Tushman, & Romanelli, 1992)
emphasized the need for such a control. Fourth, none of the earlier studies investigated whether
objective and subjective measures of prior organizational performance are associated with TMT
perceptions of CEO charisma. Waldman et al.’s (2004) conclusion that charisma was not
associated with prior organizational performance was based on simple correlations without
controlling for firm size and CEO tenure. Their measure of performance is also potentially noisy
because they measured prior performance over a five year period regardless of when the CEO
assumed that title.
In a recent editorial, Eden (2002:842) emphasized the importance of replication studies,
particularly those utilizing different samples and measures, in moving theory forward. He wrote:
“Lykken (1968) stressed the importance of constructive (italics in original) replication, defined
as research that tests the same hypothesized relationships among the same theoretical constructs
as a given earlier study but varies the ‘operationalization’ of those constructs. Confirmation of
the same hypothesis using different methods strengthens confidence in the validity of the
hypothesized relationships.” Our study is a constructive replication in that it tests the same
hypothesized relationships among the same theoretical constructs as in earlier studies, but
utilizes a different sample and varies the operationalization of the constructs (e.g. a similar, but
different measure of CEO charisma, and an objective measure of environmental uncertainty).
Furthermore, this study overcomes many of the methodological issues in earlier studies through
the use of a larger sample of firms, more respondents per firm, a comprehensive portfolio of
perceived, accounting and stock market measures of organizational performance, and rigorous
econometric methods. Such methodological improvements allow us to have greater confidence in
the results because of greater statistical power in the models, and less susceptibility to: 1) a TMT
member’s idiosyncratic rating of CEO charisma, 2) the peculiarities of any particular
organizational performance measure, and 3) under-specified models.
Organizational Performance and Subsequent Perceptions of CEO Charisma
Kelley's (1967) general attribution model, along with more specific attribution theories
and research on leadership (e.g. Meindl, Ehrlich, & Dukerich, 1985; Calder, 1977; Shamir, 1992)
have provided evidence that when organizations are perceived as having performed well, others
will attribute that success to the leaders of that organization and will endow them with positive
attributes. That said, Waldman, Bass, and Yammarino (1990) noted that the issue of causation in
the relationship between the leader and organizational effectiveness is still an open question.
While it is possible that charismatic leadership leads to organizational performance, it is also
possible that organizational performance causes attributions of charisma to be applied to the
leader (Meindl et al., 1985). They noted that future research must be performed before any
definitive statements can be made about this relationship. Thus, we expect perceptions of CEO
charisma to be higher when the organization has performed well.
Hypothesis 1: There is a positive relationship between organizational
performance and subsequent top management team perceptions of CEO
Charismatic Leadership and Subsequent Organizational Performance
While several theories of charismatic, transformational, or visionary leadership and
organizational performance have been offered (e.g. House, 1977; Burns, 1978; Bass, 1985;
Conger & Kanungo, 1987; and Shamir, House, & Arthur, 1993), an integration of these theories
by House and Shamir (1993) proposed that charisma is the central concept in each. Recent work
has suggested that the positive relationship between charismatic leadership and performance
found in earlier studies is expected to also hold true at the strategic (CEO) level (Waldman et al.
2004). The essence of extant theories is that charismatic strategic leaders may have an influence
on organizational performance because of their ability to overcome the three major inertial forces
(cognitive, motivation, and obligation (Gersick, 1991)) that keep organizations from successfully
adapting to a new environment (Agle, 1993); their ability to inspire and motivate employees and
other corporate stakeholders (Agle, 1993; Shamir, House, and Arthur, 1993); their ability to
create cohesion among the members of the organization with their vision (Waldman &
Yammarino, 1999) and power (Finkelstein & Hambrick, 1996); the influence their values have
on their strategic choices (Finkelstein & Hambrick, 1996); the cascading effect their leadership
has on followers throughout the organization, and their willingness to implement strategic
change (Waldman & Yammarino, 1999). Indeed, Waldman and Yammarino (1999) provided a
full theoretical model demonstrating how CEO charismatic leadership leads to organizational
performance through both close and distant relationships.
Adapting to a changing environment by overcoming organizational inertia is viewed as a
particularly important condition for improving organizational performance (Tichy & Devanna,
1990). Charismatic leaders overcome cognitive inertia (inability to think outside one’s own
schema) because their strong values shape choices concerning strategy. For instance, these
leaders create exciting visions of the future and promote unconventional problem-solving
approaches. Motivational inertia (desire to avoid change) can be overcome through the leader’s
ability to provide followers with confidence that changes can be positive. Shamir and Howell
(1999) noted that the vision of charismatic leaders helps followers to see opportunities in change,
and provides them with the hope and confidence in the future that allows them to mobilize their
energy in pursuit thereof. Finally, obligation inertia (commitments to constituencies) can be
overcome through the leader’s ability to change current contractual (both legal and social)
relationships with various stakeholders. Thus, when top management team members perceive
their CEO as charismatic, we expect higher subsequent organizational performance. Therefore:
Hypothesis 2: There is a positive relationship between top management team
perceptions of CEO charisma and subsequent organizational performance.
CEO Charisma, Organizational Performance, and Environmental Uncertainty
As noted by Waldman et al. (2001), Shamir and Howell (1999), and others, the level of
environmental uncertainty can affect relationships between various predictors of corporate
leadership and organizational performance. Because there is a greater perceived risk of
organizational failure when the environment is more unstable or uncertain, CEO discretion may
be enhanced during such periods (Hambrick & Finkelstein, 1987). With increased discretion, the
influence of their leadership is magnified.
Similarly, leaders in unstable, risky or crisis situations may also take on greater symbolic
importance. Factors such as greater follower effort and greater follower cooperation that mediate
the relationship between charisma and organizational performance depend on the followers’
willingness to accept the leader’s influence. Under conditions of uncertainty and crisis, followers
feel the need for greater direction and guidance (Bass, 1990), and their inclination to accept
influence may be greater (Shamir and Howell, 1999). Thus, willingness to follow the leader may
be more pronounced in unstable environments. This emphasis on the importance of uncertainty
corresponds with sociological perspectives on the importance of crises in the demonstration of
charisma and its effects (Beyer & Browning, 1999).
Finally, Pawar and Eastman (1997) suggested that firms in turbulent environments tend
to be dominated by their boundary-spanning units, as opposed to dominant technical cores.
Because the tasks in these types of units are not well-defined and thus cannot be standardized,
such organizations lend themselves to a greater influence from their charismatic CEOs.
Therefore, CEO charismatic leadership will be more highly related to organizational
performance when the organization’s environment is uncertain and volatile.
Hypothesis 3: The positive relationship between CEO charisma and subsequent
organizational performance is stronger under conditions of high uncertainty.
Sample Characteristics and Questionnaire Administration
Our questionnaire data were gathered in 1992. The sample for this study was drawn from
the Monitor Publishing Company's Financial 1000 and Corporate 1000 Yellow Books. 500
CEOs from this sample were randomly chosen to participate in this research. 128 of the CEOs
agreed to do so, representing a 26% response rate. The members of the top management team of
each firm were sent the questionnaire with an accompanying cover letter indicating their CEO's
support for the project, and an assurance of anonymity of the respondents and confidentiality of
the information. 770 out of 960 questionnaires were returned, for an 80% response rate, resulting
in an average of six respondents per firm. We compared our sample (128 firms) with the non-
responding (372) firms on a number of dimensions such as organizational age, size, abnormal
stock returns, and capital intensity of firms, as well as CEO tenure. The t-tests demonstrated no
significant differences. The CEOs in the sample had an average tenure of 6.6 years at the time
the questionnaire was administered and stayed for an average of 4.5 years after the questionnaire
administration. The sample firms averaged 55 years of age, $6.5 billion in assets, and 16,000
employees, and covered the spectrum of industries.
The various theorized characteristics of charismatic leaders were measured using a
refinement of a larger instrument developed by Podsakoff, MacKenzie, Moorman, and Fetter
(1990; see Agle, 1993 for further details on the refinement). In order to encourage a high
response rate from top executives, the design criterion of one-page precluded the use of the
multi-factor questionnaire (MLQ) (Bass & Avolio, 1990), which at the time of our survey was
available only in its entirety.
The Appendix displays five major factors that emerged from this refined instrument. In
addition to the factor scores, a global variable labeled “total charisma” was computed by adding
the raw scores of all the questionnaire items. Because of strengths and weaknesses of various
interrater agreement measures, we computed both the intraclass correlations ICC(1), ICC(2), and
(Winer, 1962; Lindell & Brandt,1999; Lindell, Brandt, & Whitney, 1999). The Appendix
shows the high values of these measures for the five factors. In addition, the alpha coefficient,
ICC(1), ICC(2), and interrater agreement (r*
) for the global charisma scale used in this study
were .94, .34, .90, and .80 respectively. Overall, the very high interrater agreement and scale
reliability justified the combination of individual manager’s responses into a single measure of
charisma for each CEO. Because statistical analyses utilizing the five charismatic leadership
factor scores, and the global charismatic leadership scale were very similar for each of the
hypotheses tested, this article reports the results of the analyses using the global charismatic
leadership scale.
Operationalizing organizational performance is always a challenge because the strategy,
accounting and finance literatures suggest that both accounting and market-based measures
suffer from measurement and controllability issues, and that these measures may not converge to
represent the same construct of organizational performance (Fryxell and Barton, 1990). Hence,
we used both primary and secondary sources of data, and objective and perceived modes of
assessment, as suggested by Venkatraman and Ramanujam (1987). We utilized the measure of
perceived organizational performance developed by Ramanujam, Venkatraman, and Camillus
(1986) that was based on four questions assessing the firm's increase in sales, earnings, market
share, and return on investment (ROI) in relation to its competitors since the time of the CEO's
ascension (measured on a seven point Likert scale from much better to much worse). Factor
analysis utilizing principal component analysis also placed these items into a single factor with
respective loadings of .88, .89, .87, and .88. Our measure of perceived organizational
performance, constructed as the average of the sum of the raw scores for these four items, had an
appropriate level of scale reliability and interrater agreement (alpha = .90; ICC(1) = .69; ICC(2)
= .89; r*
= .86).
We further operationalized organizational performance by constructing a stock return
measure and various accounting measures of performance. In general, CEOs may have greater
control over (internal) accounting measures than (external) stock market measures because of
their ability to control levels of investment, adjust discretionary accruals, and shift earnings
across periods (Murphy, 1999), and because stock market measures are subject to greater levels
We did not throw out any outliers in the construction of the TMT subjective performance and charisma measures.
However, we also constructed these measures after deleting firms with three or fewer respondents. The results did
not change.
of extraneous noise. However, it must be noted that there are no theoretical reasons to suppose
that a CEO may have greater leverage over one accounting measure than another. For example,
popular accounting measures in the literature, i.e. return on assets, equity and sales, differ only in
their denominators. CEOs, potentially, can influence all these measures to a similar extent.
Because all indicators of organizational performance are likely to be imperfect, we considered
multiple measures of organizational performance to verify that the hypothesized relationships are
robust across variations in measurement, thus increasing the value of constructive replication
(Eden, 2002).
We constructed the stock return measure, first by measuring the cumulative stock return
of each firm over the pre-questionnaire period, i.e. from the announcement of the new CEO until
the questionnaires were completed in 1992, and the post-questionnaire period, i.e. from the time
the questionnaires were completed in 1992 until the CEO’s departure or until the end of 1999,
whichever is first. We then subtracted the corresponding average cumulative stock return of the
industry (firms with the same four digit Standard Industrial Classification (SIC) code) to obtain
the industry adjusted stock return and then annualized it.
We next constructed three accounting measures following prior studies in accounting
research as (1) return on assets (ROA) computed as income before extraordinary items divided
by the total assets of a firm in a year, (2) return on equity (ROE) computed as income before
extraordinary items divided by the total stock holder equity of a firm in a year, and (3) return on
sales or profit margin (ROS) computed as income before extraordinary items divided by the net
sales of a firm in a year (this measure corresponds to the net profit margin (NPM) used by
Waldman et al., 2001, 2004). We also constructed a growth measure for each firm as the
percentage change in sales dollars (or revenues) from one year to the next. Data from the
COMPUSTAT database were obtained for each measure for each firm for multiple years that
span our sample period. We corrected all these measures by subtracting the industry averages of
the respective measures and averaged each industry-adjusted annual measure over the pre- and
post- questionnaire periods.
Unlike earlier studies (Waldman et al., 2001, 2004; Tosi et al., 2004), we utilized an
objective measure of environmental uncertainty, namely firm risk, commonly used in the
accounting, finance and strategy literatures (e.g. Gray & Canella, 1997; Core, Holthausen and
Larcker 1999; Miller, Wiseman, & Gomez-Mejia, 2002) and which may be interpreted as the
collective assessment of uncertainty by the stock market participants as opposed to the
assessment of managers. More importantly, higher stock volatility, perceived as higher risk by
the market, may also lead to higher cost of capital, further leading to financial uncertainty. We
used the volatility of stock returns during the post-questionnaire
(performance) period as our
proxy for uncertainty and estimated it as the annualized standard deviation of daily stock returns
of a firm adjusted for average industry volatility. Following prior studies (Virany et al., 1992;
Waldman et al., 2001) that argued that organizational size, CEO tenure and prior performance
should be controlled for in research seeking to relate CEO characteristics to organizational
performance, we included organizational size, measured as the value of total assets in 1991 (the
year immediately prior to the questionnaire date), CEO tenure
(measured as the number of years
the CEO held that position prior to the questionnaire date), and the prior (pre-92) industry-
adjusted organizational performance as control variables. To reduce problems associated with
Our results were similar when we used the pre-questionnaire period to estimate uncertainty.
The minimum CEO tenure (TENURE) we allowed was one year. The results remained qualitatively similar
including or excluding CEOs with this tenure requirement.
multicollinearity, similar to Waldman et al. (2001), we used Cronbach’s transformation by
centering the charisma and uncertainty variables around their means before forming the
interaction term.
Table 2 presents the correlations among the variables of interest. Charisma is
significantly correlated with the perceived performance measure (p < .01), pre-questionnaire
period stock return (p < .05), ROA (p < .05) and sales growth (p < .01). However, for the post-
questionnaire period, it is significantly correlated (p < .05) only with sales growth. CEO tenure is
associated with some measures of organizational performance. However, all the correlations
must be interpreted with caution because they represent pair-wise associations and do not control
for other factors that may impact organizational performance.
To test Hypothesis 1, we regressed CEO charisma separately on the perceived measure of
prior organizational performance and also four objective (financial) measures of prior
organizational performance, after controlling for organizational size and CEO tenure. Table 3
presents the relation between CEO charisma and various measures of prior performance. The
results suggest that the perceived measure of organizational performance is associated with
subsequent perceptions of CEO charisma. Further, some objective measures of organizational
performance i.e. stock return, ROA and sales growth, are significantly associated with
subsequent perceptions of CEO charisma, supporting Hypothesis 1. Because prior
organizational performance was measured for the period before the questionnaire was
administered, one can argue that organizational performance may influence subsequent
managerial perceptions of CEO charisma.
Table 4 presents the results of regression analyses (similar to those of Waldman et al.,
2001) for tests of hypotheses 2 and 3. The explanatory power of the models (adjusted R
) with
various measures of organizational performance ranges from .03 to .38. Prior organizational
performance is the only significant variable that explains much of the subsequent organizational
performance, except for the model with stock return for which prior period organizational
performance is not significant. These results suggest that subsequent organizational performance
is not associated with charisma or the interaction between charisma and uncertainty, thus failing
to support either Hypothesis 2 or 3. The results of hierarchical regression analyses (not shown)
also suggest that charisma and environmental uncertainty do not predict any significant variance
in subsequent organizational performance and are not associated with it even when they are
included one at a time in the regression models. We also measured organizational performance
and environmental uncertainty over short periods, i.e. a one-year period before and after the
questionnaire date. Our results do not change in the presence of these alternative measures. Our
reported results are based on the sample after deleting outliers defined as those observations with
r-student values of more than two (Belsley, Kuh, & Welsch, 1980). Our results were similar
when we did not delete the outliers. Overall, our findings are robust to various alternative
Theoretical and Practical Implications
In this research, we found evidence of 1) a relationship between perceptions of CEO
charisma and perceived measures of prior organizational performance, 2) a relationship between
perceptions of CEO charisma and some objective measures of prior organizational performance,
and no relationship with other objective measures, and 3) no relationship between charisma and
subsequent objective measures of organizational performance even after considering the
moderating effect of environmental uncertainty. Some of these findings are similar and the rest
are contrary to the findings of other recent studies examining these relationships.
As illustrated in Table 1 and as discussed in the introduction, some of the reasons for the
mixed findings may be the methodological differences in the studies. Another factor, not yet
introduced, is the potential for same-source and same-method biases. In our study, when testing
Hypothesis 1 using perceived measures of charisma and organizational performance, we found
that same-source bias existed and minimized it by using the split sample technique (Rousseau,
1985). However, same-method bias might still have existed. The presence of a stronger
relationship between CEO charisma and perceived prior organizational performance than with
objective measures of prior organizational performance obtained from sources other than the
questionnaire exposes this bias. It is possible that past findings may also have had this
limitation. Waldman et al. (2001) noted that none of the studies meta-analyzed by Lowe et al.
(1996) used hard measures of actual financial performance. In addition, Waldman et al. (2001)
and Tosi et al. (2004) found a significant interactive effect for perceived environmental
uncertainty, but their perceived measures of charisma and uncertainty came from the same
source and through the same method. Neither of these studies found a direct relationship between
a perceived measure of charisma and an objective measure of performance. Only after adding
the interaction between perceived charisma and perceived uncertainty was any relationship
We also gain insight from the different measures used in these studies. Through use of
the MLQ, Waldman et al. (2004) substituted intellectual stimulation for charisma and found a
significant moderating role for environmental uncertainty in the relationship between CEO
charisma and organizational performance. This result suggests that researchers should look
closer at the intellectual stimulation portion of charismatic leadership as a potential mediator of
CEO charisma and organizational performance. Intellectual stimulation might be a particularly
important aspect of leadership when business conditions are changing and followers need to be
able to think outside the box. Similarly, our use of an objective measure of uncertainty might
have had a different effect from that found in studies that used perceived measures. The top
management team’s own perception of the uncertainty of the environment or level of firm crisis
might lead them to be more accepting of change (Tichy & Devanna, 1990) than an objective
(stock market) assessment of the firm’s uncertainty.
There are also theoretical reasons that might explain why the various studies have failed
in general to find a direct relationship between CEO charisma and organizational performance.
First, empirical testing is in its early stages. Charismatic leadership has been theorized on a
number of dimensions, not all of which have been tested in the research. For example, notions of
behavior novelty (unconventionality) and challenges to the status quo (Conger & Kanungo,
1998) have not been tested. Shamir and Howell (1999) have suggested that the effectiveness of
charismatic leaders is greater in the early and later stages of organizational life cycle, a potential
moderator not yet included in the research. Waldman & Yammarino’s (1999) model of the
relationship between CEO charisma and organizational performance included a number of
mediating and moderating variables. To better understand the causal nature of this relationship,
further research needs to include such mediating and moderating variables to examine the black
box between CEO charisma and organizational performance. As an example of such research, in
a longitudinal randomized field-experiment, Dvir, Eden, Avolio, and Shamir (2002) found that
transformational leadership had positive effects on follower development and performance.
Also, leaders in small organizations generally have greater latitude of action (Hambrick
& Finkelstein, 1987) than leaders sampled in existing studies. Thus, in a sample with smaller
firms one may find a greater effect of CEO charisma on organizational performance. In fact,
Koene et al. (2002) found that managerial charisma was correlated with the performance of small
supermarkets, but was not correlated with that of large supermarkets. Also, the function of
CEOs in large firms is often different from that in smaller firms. These CEOs are often more
involved with public relations activities and with capital allocation and corporate development
(e.g. mergers, acquisitions, divestitures) than with the actual “running of the business” (Garten,
2001). In fact, the role of the CEO in many multi-division firms is to serve as a substitute for the
capital markets, evaluating the performance of the leaders of the corporate divisions and
allocating capital and changing leadership accordingly, a more evaluative than inspirational role.
In such firms, the line operating executives’ level of charisma might actually be more important
than the CEO’s. In addition, in such large firms, Boards of Directors and the financial
community also serve to restrain the CEO’s power. Future studies might include as variables the
degree to which the CEO is involved in the actual operations of the firm, as well as the degree to
which his or her power is constrained by the Board of Directors and the financial community.
However, given the absolute complexity and diversity of variables which contribute to
organizational performance in large sized firms, it may be very difficult to find an effect of CEO
charisma on organizational performance.
Alternatively, it may be that charismatic leadership at the CEO level is not more effective
leadership. Yukl (1999) suggested a number of reasons that this might be the case, such as
inappropriate radical changes resulting from charismatic leadership, misuse of power by
charismatic leaders, and polarization of organization members. Conger & Kanungo (1998) and
Maccoby (2000) proposed that the downsides of narcissistic tendencies of charismatic leaders
might neutralize the benefits of their leadership. Such negative consequences of charisma have
not been tested in extant research.
To answer the question posed in the title of this article “Does CEO Charisma Matter?”
our evidence suggests that CEOs who are perceived to be more charismatic appear to be
perceived as more effective. In this subjective sense, CEOs matter. However, the lack of
corroborating evidence from objectively-assessed CEO performance suggests that the search for
charismatic CEOs may be based more on implicit theory or halo effects than on solid evidence
that charisma really does make CEOs more effective. The present study is not able to provide
stock analysts, investors, and Boards of Directors with evidence that CEO charisma is
necessarily beneficial in terms of predicting future financial performance, even under conditions
of uncertainty, and suggests that they need to be cautious when considering the potential benefits
of charismatic leaders. In the same vein, in a recent book examining executive succession,
Khurana (2002) refers skeptically to the phenomenon of looking for a charismatic CEO as
“Searching for a corporate savior: The irrational quest for charismatic CEOs.” He suggests that
Boards of Directors have been under the illusion that charisma is the important element of
leadership performance and that they should be looking for specific firm-related leadership skills
in potential CEOs instead of charisma. The efficacy of a leader’s charisma in terms of directly
shaping organizational performance may therefore vary by level in the hierarchy – raising
potential questions about whether prior research which found solid evidence between leader
charisma and leadership effectiveness can be generalized across all situations.
Limitations and Conclusion
While this research provides a much larger sample and uses more measures of the
phenomena under investigation than similar studies, it is not without its limitations. Primary
among these is the self-selected nature of the sample. We were unable to determine if the sample
is skewed based on CEO charisma, and thus, it is possible that our sample is overly-populated
with CEOs who agreed to participate in the research because they considered themselves to be
charismatic. Also, as noted earlier, this sample consists solely of large firms - a restricted range
of firms - which might have constricted the relationships revealed.
In addition, in spite of measuring organizational performance in two different timeframes
i.e. pre- and post-questionnaire, it is still not possible for us to completely disentangle the causal
nature of the relationship between CEO charisma and organizational performance. Earlier works
using this database (Agle, 1993; Agle & Sonnenfeld, 1994) reported a relationship between CEO
charisma and organizational performance, but acknowledged that given the timeframe used in
their research (organizational performance preceding measurement of CEO charisma), they
could not demonstrate this causal direction empirically. Yukl’s (1999) argument that charisma is
transitory and Weber’s (1947) classic argument that charisma cannot remain stable, but becomes
either traditionalized or routinized over time suggest that CEO charisma’s impact on
organizational performance is greatest for the earlier part of a CEO’s tenure. Thus, because our
measurement of charisma took place on average after six years of CEO tenure, one may still
argue that the significant positive association we found ( see Table 2) between charisma and pre-
questionnaire organizational performance measured over the earlier part of CEO’s tenure is
evidence that charisma matters for organizational performance. Those who would support this
interpretation could refer to research suggesting that TMT members, who are very close to the
CEO, are less likely to attribute their perceptions of CEO charisma to prior organizational
performance (Shamir, 1995).
To go beyond this study to investigate the impact of CEO charisma on organizational
performance one would need to create a design, similar to that utilized by House, Spangler, and
Woycke (1991) to test for the effects of presidential leadership, in which CEO charisma would
be measured before the CEO ascended to that position. While difficult, one could envision
measuring the charisma of a large group of top executives likely to rise to the CEO level within a
short time period and then testing for organizational performance effects after they become CEO.
Alternatively, one could measure charisma immediately after the appointment of the CEO or
based on archival materials (articles, speeches or videotapes) before the CEO assumed that title.
All these designs would help explore the short-term versus long-term impact of charisma on
organizational performance while eliminating the confounding effect of prior organizational
performance on perceptions of charisma. While, the present results show that the significant
relationship between prior performance and ratings of CEO charisma is not complemented by
evidence of any relationship between ratings of CEO charisma and subsequent performance, the
conclusion that CEO charisma does not affect subsequent performance cannot be ruled out.
There remain many unresolved issues that potentially could cast a different light on this
relationship. These may be fruitful areas for future research.
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Comparison of Empirical Studies of CEO Charismatic Leadership and Organizational Performance
Study Current study Waldman, Ramirez, House,
and Puranam (2001, AMJ)
Waldman, et al. (2004, LQ) Tosi et al. (2004, LQ)
Sample 128 Public U.S. Firms across
48 Public U.S. Firms across
industries (only 32 with CEO in
place for entire period)
69 Public U.S. and Canadian
Firms across industries
59 Public U.S. Firms across
Informants Top management team members Top management team members Top management team members Top management team members
Number of Informants
770 survey respondents – average
of six per CEO (at least three per
Unspecified number of survey
respondents (estimated as 125) -
average of less than three per
Less than 193 survey
respondents – average of less
than three per CEO
112 survey respondents – average
of less than two per CEO
Response Rate 26% of 500 CEOs agreed to
participate, 80% of executives
20% of executives surveyed 28% of executives surveyed 37% of executives surveyed
Measure of Charismatic
Adaptation of scale by Podsakoff,
et al. (1990)
Multi-Factor Leadership
Questionnaire (Bass & Avolio,
Multi-Factor Leadership
Questionnaire (Bass & Avolio,
Multi-Factor Leadership
Questionnaire (Bass & Avolio,
Measures of
– Industry-adjusted
Sales Growth
Stock Market
– Industry adjusted
stock return
– TMT evaluations of
firm performance
– Industry-adjusted
net profit margin (NPM)
Accounting – Industry-adjusted
ROA, NPM, Sales Growth
Accounting – Industry-adjusted
Stock Market
– Industry adjusted
stock return
Measure of Uncertainty Objective - Volatility of stock
returns (Core, Holthausen and
Larcker, 1999)
Subjective – Perceived
Environmental Uncertainty
(Khandwalla ,1976)
Subjective - Perceived
Environmental Uncertainty
(Khandwalla ,1976)
Subjective - Perceived
Environmental Uncertainty
(Khandwalla ,1976)
Control Variables CEO tenure, organizational size,
prior firm performance
CEO tenure, organizational size,
prior firm performance
CEO tenure (before and after),
organizational size
Organizational size, time trend
Repeated Measures
Pre- and Post-Survey period
accounting and stock market
performance measures. Prior firm
performance was controlled for.
Pre- and Post- Survey period
accounting performance measure.
Prior firm performance was
controlled for.
Only post-survey period
measures. No control for prior
firm performance.
Only post-survey period
measures. No control for prior
firm performance.
Descriptive Statistics and Correlation Analysis
Variable Mean S.D.
1 2 3 4 5 6 7 8 9 10 11 12 13 14
1. CEO Charisma 115.30 14.90
2. Perceived Performance (pre-92) 17.06 4.84 .49**
3. Adj.ROA (pre-92) 3.89 10.41 .14* .19**
4. Adj.ROE (pre-92) 3.76 16.51 -.11 -.01 .24*
5. Adj.ROS (pre-92) 7.16 13.89 -.03 .03 .53** .12
6. AdjSales Growth (pre-92) 4.78 15.97 .24** .38** .01 -.02 -.02
7. Stock return (pre-92) 3.77 19.53 .17* .24** .08 .07 .02 .17**
8. Adj.ROA (post-92) 5.94 12.00 .11 .07 .56** -.02 .44** .06 .02
9. Adj.ROE (post-92) 7.54 19.48 -.08 -.11 .01 .16 .02 -.06 -.01 .15
10. Adj.ROS (post-92) 10.61 17.05 -.12 -.20 .33** .03 .63** -.12 -.05 .62** .06
11. Adj.Sales Growth (post-92) 4.44 15.44 .22** .25** .04 -.01 -.10 .06 .08 .16* -.02 -.03
12. Adj.Stock Return (post-92) 8.79 57.39 .05 .08 .22** .04 .10 .02 .02 .33** .14 .06 .26**
13. Uncertainty .13 .04 .04 .08 -.08 -.10 -.02 -.05 .01 -.05 -.05 -.06 .04 -.02
14. Total Assets (in billions) 6.50 12.63 .07 -.05 -.05 .07 .01 .13 -.06 -.08 -.02 -.02 -.05 -.03 -.21**
15. CEO Tenure (in years) 6.64 6.05 .14 .29** .13 .18* .05 .08 .22** -.04 .08 -.07 -.05 .15* .01 -0.09
The prefix Adj. denotes that the variables are industry-adjusted, n=128.
* p < .05
** p < .01
The Regression of CEO Charisma on Perceived, Stock Market, and Accounting Measures
of Prior Organizational Performance
Predictor Model 1
Model 2
Model 3
Model 4
Model 5
Model 6
Total Assets .07 .05 .04 .04 .04 .01
CEO Tenure .02 .13 .12 .17 .15 .09
Perceived performance (pre-92) .55**
Adj. Stock Return (pre-92) . 27*
Adj. ROA (pre-92) .17*
Adj. ROS (pre-92) .12
Adj. ROE (pre-92) -.08
Adj. Sales Growth (pre-92) .37**
.31 .06 .04 .03 .02 .09
Adj. R
.29 .04 .03 .01 .01 .08
F-value 18.60** 3.42** 1.67 1.32 0.83 3.66**
127 125 126 124 125 125
a - standardized regression coefficients shown.
b - All the results are based on a sample that was obtained after deleting observations that had r-
student values of more than 2 (since our sample size is 128, as can be seen from the table, up to
four outliers were deleted for different models).
* p < .05
** p < .01
Regression of Subsequent Organizational Performance on Prior CEO Charisma
Adj. Stock
Adj. ROA
Adj. ROS
Adj. ROE
Adj. Sales
Total Assets .01 -.11 .02 -.04 -.24
CEO Tenure .04 -.12 .01 .08 -.08
Prior performance (pre-92) .02 .49** .75** .11 .43**
Uncertainty -.02 -.08 -.04 -.02 -.03
Charisma .03 .11 -.07 .02 .06
Charisma x Uncertainty -.03 .02 .01 .02 .08
.04 .27 .41 .06 .24
Adj. R
.03 .23 .38 .04 .21
F-value .88 7.19** 12.77** 1.63 5.69**
127 125 125 124 125
a - standardized regression coefficients shown.
b - All the results are based on a sample that was obtained after deleting observations that had r-
student values of more than 2 (since our sample size is 128, as can be seen from the table, up to
four outliers were deleted for different models).
* p < .05
** p < .01
Varimax Rotated Factors Factor Cronbach’s ICC(1) ICC(2) r
Loadings alpha
Our Chief Executive Officer
DYNAMIC LEADERSHIP .92 .85 .91 .82
is dynamic .83
has the ability to excite a group of people .82
is charismatic .82
when communicating, drives to motivate with
every word, story, and inflection .76
communicates an exciting vision of the future
of the organization .71
paints an exciting picture of the future of the organization .67
is trusted by members of the organization .79
is respected by members of his/her top management team .77
sets a good example .75
provides a good model for me to follow .70
will not sacrifice his/her moral standards .65
has a clear understanding of where we are going .61
gives us the feeling that, succeed or fail, we are all .52
in this together
gives me special recognition when my work is especially good .87
informs others in the organization when I do outstanding work .83
gives me positive feedback when I perform well .83
encourages me to feel positive about myself if I do an
assignment especially well .80
demonstrates total confidence in me .59
looks out for my personal welfare .57
expects me to give 100% all of the time .79
expects less than other supervisors with whom I have worked -.75
insists on only the best performance .64
LEADER RISK .85 .63 .83 .83
risks substantial personal loss in order to achieve his/her vision .85
has voluntarily risked a great deal on the success or failure
of our mission .84
Bradley R. Agle ( is an associate professor in the Katz Graduate School of
Business at the University of Pittsburgh, where he is also the Director of the David Berg Center
for Ethics and Leadership. He received his Ph.D. from the University of Washington. His
research interests include CEO leadership, stakeholder management, ethical leadership,
measurement of ethics in organizations, and religious influences on business ethics.
Nandu J. Nagarajan ( is a professor at the Katz Graduate School of
Business at the University of Pittsburgh. He received his PhD from Northwestern University. His
research interests focus on corporate governance, performance measurement and managerial
incentives, and corporate restructuring.
Jeffrey A. Sonnenfeld ( is the Lester Crown Professor of
Management Practice and Associate Dean of the Yale School of Management where he is also
the President of the Chief Executive Leadership Institute. He received his doctorate, MBA, and
AB from Harvard University where he previously served on the faculty for a decade. His
research focuses on CEO leadership, succession, careers, and board governance.
Dhinu Srinivasan ( is an associate professor in the Katz Graduate School
of Business at the University of Pittsburgh,. He received his Ph.D. from the University of
Minnesota. His research interests include Corporate Governance, Performance Measurement
and Incentives in Organizations, Non-financial Performance Measures, Design of Cost Systems
and Cost Management.
... A chameleon is a reptile that has the ability to change its skin, and these changes can enable this creature to adapt and to blend into different environments. Some would argue that many people act as Chameleons, by the way they change their clothes, attitudes, and/or behaviors to placate cultures and subcultures to survive, psychologically and/or materialistic matters [4]. Chameleon leadership started as a conceptual idea, and this concept focused on leaders' abilities to adjust their attitudes and behaviors to lead unique environments. ...
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Joint author research article published in above journal Pp. 46-55 entitled "Financial Distress Evaluation of Indian Steel Companies Based On KMV Merton Default to Distance Model"
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This study investigates what are the determinants of Online Learning Readiness among International Business (IB) undergraduates of a state University in Sri Lanka. It further extends and validates the study by Hung, Chou, Chen, and Own (2010). Moreover, the study was conducted against the backdrop of the Covid 19 pandemic, where almost every Higher Educational institution across the globe, adopted online learning strategies to adhere to social distancing requirements. This study mainly focuses on undergraduates in the area of International Business, which is an interdisciplinary study with unique teaching and learning strategies available for academics. For this purpose, an online self-administered questionnaire was distributed among 123 International Business undergraduates. The findings of this study suggest that there is no difference between male and female students as well as third and final year students with regard to their response towards Online Learning Readiness through an independent sample t-test. Further, the implications of this study highlight the need to adopt unique strategies to improve, Online Communication Self�efficacy as well as Technology Readiness dimensions, as well as the importance of creating an inclusive online learning environment for all students with different backgrounds through unique online teaching strategies in the domain of International Business. Keywords: Online Learning Readiness, Teaching in International Business, Covid 19 pandemic, Higher education sector
Following Chapter 3, on Kazuo Inamori’s trajectory and Chapter 4 on Ideology/Rules, this chapter “brings up the rear” regarding Division 1 Hypostasis. In this context, this chapter provides a perspective on leadership analysing (1) Kazuo Inamori’s view of (after)life, (2) his leadership description, (3) Inamori’s management philosophy, including Saigo Nanshu’s teaching, and (4) a review of literature on leadership.
This study tests charismatic leadership theory using a sample of 250 chief executive officers (CEO) of major U.S. firms. Based on multiple responses from the top management team of each firm and objective measures of performance, the study provides evidence of a positive relationship between CEO charisma and CEO performance.
A letter from the editor is presented which discusses the role of meta-analysis and replication research in the articles submitted to the periodical for review. The author points out that the journal uses the idea of articles having an important contribution to the field of management as a basis for review. This leads many of the articles to contain information on relatively new ideas, even though some of those ideas contain information of little importance. For this reason, the periodical accepts articles containing replication research and meta-analysis.
We present a model of CEO charismatic leadership in organizations and show how such leadership can, through levels of management and analysis, impact organizational performance. We integrate levels issues relevant to the conceptualization of theoretical constructs and their relationships, measurement, and echelons, and develop the concept of close versus distant leadership as a means of understanding the dynamics of CEO leadership. We also include a consideration of possible alternative levels of analysis at which the constructs in our model may be operating.
We argue in this paper that in an age of complexity, change, large enterprises, and nation states, leaders are more important than ever. However, their effectiveness depends on their personality and charisma and not solely on their control over bureaucratic structures. We used a study of U.S. presidents to test a general model of leader effectiveness that includes leader personality characteristics, charisma, crises, age of the institution headed by the leader, and leader effectiveness. Age of the presidency accounted for approximately 20 percent of the variance in presidential needs for power, achievement, and affiliation. Presidential needs and a measure of leader self-restraint in using power, the age of the presidency, and crises accounted for 24 percent of the variance in presidential charisma. Age of the presidency, crises, needs, and charisma together predicted from 25 percent to 66 percent of the variance in five measures of presidential performance. Our study demonstrates that personality and charisma do make a difference.