Matters of the heart like love and marriage may seem deeply personal affairs, but there’s good reason to pay attention to whether your company CEO is a steady stag or a young buck outside the office. That’s because single CEOs invest more aggressively—in capital expenditures, R&D, advertising and acquisitions—and are associated with higher stock volatility than their married counterparts.
These are the findings of Status, Marriage, and Managers’ Attitudes To Risk, a research paper by Nikolai Roussanov and Pavel Savor of the Wharton School of the University of Pennsylvania. The paper revealed single CEOs, especially younger ones, take greater risks when they are looking for potential mates who they believe will be drawn to their wealth.
However, the marriage market is not mediated by money, but by status, and that’s what this research is really about, the authors note. “At the heart of this is the idea that people of all kinds care about status and it effects the decisions they make,” says Savor. “But with CEOs, it’s easier to observe their behaviour, and the economic importance of the decisions they’re making is high.”
Savor and Roussanov use two famous American executives to explain their thesis: “Typically, we point to Steve Ballmer, the CEO of Microsoft, and Larry Ellison, the CEO of Oracle,” says Savor. “Ellison is famous for his multiple divorces and he’s also famously aggressive in his business dealings. Microsoft as a company has been more conservative, broadly speaking, and Steve Ballmer has been married to his wife for over 20 years.”
The research doesn’t judge which leader is better, but rather explains why they may act the way they do. There are no controls for gender in the study, although the sample is representative of the real world, with fewer women on the list.
A Canadian example of a risk-taking CEO is poker-playing circus mogul Guy Laliberte of Cirque du Soleil. He had a common-law partner for 10 years who sued him for millions in 2009, and is now engaged to a former model. Then there are the level-headed married types like Ed Clark, TD Bank president and CEO. He and his wife, Fran, have four children and six grandchildren.
The study only looks at CEOs, but the marriage of status and risk-taking goes beyond the C-suite, the researchers say. “We definitely think it applies more broadly,” says Savor. While the sample dynamic may change with people waiting longer to get married and more women entering the data pool, Savor is optimistic the results on the relationship between status and risk-taking will stay constant. “We’re relying on an economic model to drive this theory, so unless something fundamental changes in the way people choose their partners, we think the results will be the same over time.”