On average, good-looking bankers and CEOs make a million dollars more than their less attractive peers — even if they’re worse at their job.
A study published in the Journal of Economics and Business found that attractive bank executives receive 24 percent more total compensation – while other studies suggest that their looks also attract more investment.
The authors of the study, published earlier this year, concluded that “looking good pays off,” especially in the world of banking, where the stakes are high.
They say that’s because good-looking executives are more likely to attract investors and be promoted purely based on their physical attributes.
That’s despite the fact that good-looking bosses are at a higher risk of making mistakes than their more homely peers, because a lifetime of praise for their looks can leave them arrogant and prone to taking risks that backfire.
The study was authored by Finnish researchers Shaker Ahmed, Mikko Ranta, Emilia Vähämaa and Sami Vähämaa and evaluated 167 banks and 272 individual CEOs.
“Facial Attractiveness and CEO Compensation: Evidence from the Banking Industry” claim that the overall compensation of above-average looking bank CEOs is approximately 24 percent, or $1.06 million, higher than the compensation of CEOs with below-average appearance.
Elizabeth Holmes, the now-disgraced founder of Theranos, recently explained that she was forced to wear a turtleneck and red lipstick as camouflage as she tried to attract investment for her company. She faked her “look” to get ahead
In addition, good-looking employees receive a 55 percent higher total in bonuses, stock awards and option awards than their less attractive counterparts.
Significantly, the research also found that the so-called “beauty premium” could not be explained by the age, gender or ethnicity of the subjects studied.
And the trends were the same regardless of bank size or business model.
The abstract of the paper reads: “This paper examines the impact of facial attractiveness on the compensation of chief executive officers (CEOs) of banks.”
“Consistent with the so-called beauty-premium hypothesis, we document that looking good pays off for bank CEOs.” In particular, by using machine learning to assess the facial expressions of CEOs of large US banks, we find that the facial attractiveness of CEOs is positively related to total annual compensation and the discretionary, performance-based components of compensation.
“The total compensation of bank CEOs with above-average looks is approximately 24% higher than the compensation of CEOs with below-average looks and takes into account the control of various CEO-specific and bank-specific characteristics that are known to impact executive compensation.”
“Furthermore, our results suggest that facial attractiveness has a weak positive association with annual base salary, while having no association with salary performance and salary risk sensitivity of a bank’s CEO pay.”
“Taken together, our empirical results provide strong evidence for the existence of a beauty premium in the executive labor market.”
The study used technology to rate CEOs’ beauty based on “the biological beauty traits, such as average facial features, bilateral symmetries, and sexual dimorphism, as well as non-physical traits, such as pleasant facial expressions, youthful appearance, and good grooming.”
It goes on to say, “Our empirical results provide strong evidence for the existence of a beauty premium in CEO compensation.”
“Specifically, we document that facial attractiveness is positively associated with total compensation and bank CEOs’ discretionary, performance-based compensation components.”
“The level of documented beauty premiums in bank CEO compensation is economically significant.”
“Our results suggest that increasing CEO facial attractiveness by one standard derivative increases overall compensation by almost 9% ($395,000) after accounting for various CEO-specific and bank-specific attributes that are known to differ affect executive pay.”
“Additionally, the total compensation of above-average looking bank CEOs is approximately 24% ($1.06 million) higher than the compensation of below-average CEOs, and the above-average looking CEOs have approximately 55% more total bonuses and stocks .” grants and option grants than their less attractive competitors.
Debrahlee Lorenzana publicly accused Citibank of firing her in 2010 because her double-D implants made her “too attractive” and “too distracting” to male colleagues
“Nonetheless, our results also suggest that facial attractiveness has only a weak positive association with annual base salary, while having no association with salary-performance and salary-risk sensitivity of the bank’s CEO pay.”
“We also show that the beauty premium in bank CEO compensation cannot be explained by demographics such as age, gender or ethnicity, nor by differences in bank size and business models.”
And according to a separate study by the Shanghai Advanced Institute of Finance, good-looking managers attract more investment than their uglier peers, even though their funds don’t perform as well, reports WSJ.
The researchers hypothesize that this difference in performance could be due to more attractive workers being more confident about their work.
The level of attractiveness among co-workers and how this relates to job performance has been the subject of discussions in the workplace.
Debrahlee Lorenzana publicly accused Citibank of firing her in 2010 because her double-D implants made her “too attractive” and “too distracting” to male colleagues.
After undergoing extensive cosmetic surgery to look like a “cross between Pamela Anderson and Carmen Electra,” Lorenzana said she was sexually harassed because of her figure.
She said she was instructed not to wear turtlenecks, pencil skirts, 8-inch heels or form-fitting business suits.
Lorenzana, then 33 years old, single mother, said other colleagues wore much more revealing outfits than her.
“They said her body shape was different than mine and I drew too much attention,” she said at the time.
The case eventually went to arbitration, but Citi has since confirmed that it did not pay her any damages.
Lorenzana later worked for Chase in offices in Brooklyn and Queens.
Recently, Elizabeth Holmes, the now-disgraced founder of Theranos, revealed that she was forced to wear turtlenecks and red lipstick as camouflage while trying to attract investment to her company.
In reality, she claims she’s more relaxed – with less tame hair and normal clothes.
But when her scam scheme was uncovered, she revealed that even her famous voice was an act — all to lure more people to her unfunded science and tech startup.