STREET DOGS

We might have long suspected that psychopaths congregate in business schools; that the more empathychallenged among us tend to end up in senior management roles. But until now, no one has answered the all-important question of how that might affect one’s portfolio.

Now a study by researchers at the University of Leicester and Coventry University has led to the conclusion that “managerial psychopathic behaviour is an ominous sign of shareholder wealth destruction”.

The study looked at whether it was possible to forecast oneyear-ahead returns of individual companies based on the observed “psychopathic” characteristics of their top management team. Among the key findings are “that language characteristic of psychopaths present in annual report narratives, questionable integrity, excessive risk-taking and failure to contribute to charitable undertakings tend to reduce future shareholder wealth”.

Does it mean psychopaths are bad for business? Maybe not. Nor does it mean bad returns are necessarily the result of having a “differently virtued” individual sitting atop the company. But it does suggest that instead of the common notion that you want to have a “killer” on your side, shareholders may be better served by adopting the genteel view that “psychopaths are bad”.

The study suggests firms could benefit from incorporating psychological evaluation in their recruitment processes.

“We are able to predict significant falls in stock prices of companies which are deemed likely to have psychopaths in their echelons of power,” claim the researchers. If market participants identify these companies, “they will be able to enjoy superior investment performance by simply eliminating these inferior stocks from their portfolios”.