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Facing facts about picking stocks

If you want to know whether the stock you are thinking about buying for your client is a good deal, look at the face of the company's chief executive

If you want to know whether the stock you are thinking about buying for your client is a good deal, look at the face of the company’s chief executive.

Hear me out — it is all very scientific.

New research based on a sample of 55 male chief executives of publicly traded Fortune 500 companies found that those whose faces are wider relative to height tend to lead their companies to better financial performance than those whose faces are skinnier or narrower.

“In our sample, the CEOs with the higher facial ratios actually achieved significantly greater firm financial performance than CEOs with the lower facial ratios,” Elaine M. Wong of the University of Wisconsin-Milwaukee said in a prepared statement.

The study, which she conducted with Michael P. Haselhuhn, also of UWM, and Margaret E. Ormiston of London Business School, will be published in the November issue of Psychological Science.

Before you make an “I don’t believe this” face (whether your own is narrow or wide), there is plenty of evidence to back up the researchers’ findings.

Recently, a number of scientific studies have been published showing that greater facial width-to-height ratio is associated with more-aggressive behavior in men.

For example, hockey players with wider faces spend more time in the penalty box for aggressive behavior on the ice than their narrow-faced teammates. What’s more, some facial research has concluded that men with higher facial width often feel more powerful.

The conclusion of the study is that the more powerful a chief executive feels, the more they tend to look at the big picture rather than focusing on the small details. They are also better at staying on task.

The study’s authors believe that the feeling of power might actually be correlated with a company’s financial performance. It is for that reason that the study also deduced that there is a real connection between more-aggressive leadership and successful organizations.

Some specific examples are cited in the study. For example, General Electric’s broad-faced chief executive, Jeffrey R. Immelt, successfully transformed GE into a more eco-friendly company in 2004 despite almost unanimous disapproval of his plans from his leadership team.

The study also calls to mind that BP struggled under the leadership of long-faced Tony Hayward, who stepped down after the Gulf of Mexico oil spill. Meanwhile, the company’s rival Shell has prospered under its broad-faced chief executive, Peter Voser.

Some of the leading and most wide-faced chief executives include Donald Trump, former chief executive Herb Kelleher of Southwest Airlines and Eric Schmidt of Google. All of them have led their companies to impressive growth and profits.

Meanwhile, many long-faced leaders have run into trouble, including Richard S. Fuld Jr. of the doomed Lehman Brothers and Dennis Kozlowski of Tyco International, whose decision to throw his wife a lavish $2 million toga-themed birthday party spelled the end for him.

“When we statistically account for factors such as firm size and past financial performance, we find that firms that have CEOs with relatively wider faces achieve about 10% higher financial performance, as measured by return on assets,” Ms. Wong wrote in the study.

Although many past scientific studies have shown that people intuitively associate physical characteristics with leadership ability, this study apparently is the first to identify physical characteristics that predict actual leadership performance.

So though thin is in, big faces may mean big performance.

Jim Pavia is the editor of InvestmentNews.