Match Made at Birth? What Traits of a Million Swedes Tell Us about CEOs

This paper analyzes the role three personal traits—cognitive and non-cognitive ability, and height—play in the market for CEOs. We merge data on the traits of more than one million Swedish males, measured at age 18 in a mandatory military enlistment test, with comprehensive data on their income, education, profession, and service as a CEO of any Swedish company. We find that the traits of large-company CEOs are at par or higher than those of other high-caliber professions. For example, large-company CEOs have about the same cognitive ability, and about onehalf of a standard deviation higher non-cognitive ability and height than medical doctors. Their traits compare even more favorably with those of lawyers. The traits contribute to pay in two ways. First, higher-caliber CEOs are assigned to larger companies, which tend to pay more. Second, the traits contribute to pay over and above that driven by firm size. We estimate that 27−58% of the effect of traits on pay comes from CEO’s assignment to larger companies. Our results are consistent with models where the labor market allocates higher-caliber CEOs to more productive positions. JEL-classification: G30, J24; J31 * E-mails: [email protected], [email protected], [email protected]. We are grateful to Joao Cocco, Francesca Cornelli, James Dow, Alex Edmans, Andrea Eisfeldt, Julian Franks, Magnus Henrekson, Matti Sarvimäki, Henri Servaes, Luke Taylor, and Joacim Tåg, and to seminar participants at the Aalto University, Research Institute of Industrial Economics (IFN), London Business School, and University of Geneva for valuable comments and suggestions. We thank Antti Lehtinen, Ivan Baranov, Petri Hukkanen, and Lari Paunonen for superb research assistance, Deloitte Institute of Innovation and Entrepreneurship, Jan Wallander and Tom Hedelius Research Foundation, Marianne and Marcus Wallenberg Foundation, OP-Pohjola Foundation, SNS Centre for Business and Policy Studies, and Wihuri Foundation for financial support, and IFN for hospitality.