Assessing CEOs: A Missing Layer in Investment Analysis
Last July, I published a piece of research exploring the CEO’s past, how to assess it and how it shapes the way she leads. Today, I’m sharing the second article in this series on the CEO’s mind, this time focusing on the Present.
This topic raised several questions for me, which I’ll attempt to address here.
What is the point of spending time evaluating a CEO’s character?
There are many ways to invest in the stock market or to compound capital over time. I’m not dogmatic about investment styles, unlike some specialists in the field, partly because I have been, and still am, an allocator, in addition to being a stock picker. Many managers justify their investment process by what they believe will generate the highest returns. Personally, I think it ultimately comes down to what makes sense to you. That, in my view, is precisely why markets (and the world more broadly) are so diverse. What follows reflects what makes sense to me today.
I believe everything ultimately boils down to people. Organizations are made of people, just as politics and most dynamics in our world are. When I study a company and its culture, I like to think of it as having been shaped by one (or a few) individuals at its core. While it is true that a company initially reflects the founder’s values and ethics, this becomes less true as organizations grow. In large companies, countless influences shape the future, and the CEO’s ability to directly imprint strategy is diluted across hundreds or thousands of employees.
This is also why I believe the impact of a CEO on a company is inversely correlated with its size, and why I tend to focus more on small- and mid-cap companies than on large ones.
The influence a founder has on a company’s culture is fundamental. I’m drawn to businesses that remain a pure expression of their founder’s original vision. And if the founder-leader plays such a critical role, I want to understand them beyond a résumé or a LinkedIn profile.
How can to assess personality traits?
There are many frameworks designed to assess personality. In practice, however, nothing about this process is entirely scientific. Investors constantly seek ways to reduce information asymmetry when making decisions. That’s why we read extensively, build models, and create projections. Our brains tolerate uncertainty poorly, so we anchor ourselves to parameters, fully aware that they are not reality, but approximations of what might be.
When it comes to people, the only reliable predictors are time and observation. If you think about it, this is no different from building any human relationship, whether with a friend, a teacher, or a lover. The first signal often comes from a “gut feeling,” intuition, or what some might call alchemy. The terminology varies, but the experience is universal and difficult to articulate. Over time, you observe consistency, identify recurring behaviors, and look for traits you value. This process gradually reduces uncertainty.
With managers, the process is similar, except that we rarely have the luxury of prolonged, personal interaction. Building conviction and trust therefore becomes more complex.
One of the main frameworks I’ve learned to use when assessing personality traits is the Big Five Index.
The Big Five is a scientifically grounded personality framework, distinguished by its data-driven construction and strong empirical validation across cultures and over time. Rather than categorizing individuals into rigid types, it describes personality along five continuous and largely independent dimensions.
(Note: Large-cap company CEOs are used throughout this section solely for illustrative purposes, as their leadership styles and public communication are widely documented and familiar to most readers. The examples are intended to facilitate understanding and comparability, not to express investment views or endorsements. I am not invested in any of the companies mentioned and have not met or interacted personally with any of the referenced CEOs.)
Openness
Reflected in creativity, intellectual curiosity, and a willingness to explore new ideas or untested paths. In a corporate context, this often appears through the pioneering of new products, technologies, or markets. For example, Elon Musk’s sustained focus on electric vehicles, space exploration, and artificial intelligence signals exceptionally high Openness.
Conscientiousness
Associated with discipline, organization, persistence, and a strong work ethic. High Conscientiousness is often visible in long-term execution and operational rigor. Mark Zuckerberg’s intense focus and relentless work pace, as well as Jensen Huang’s methodical and disciplined growth strategy at NVIDIA, are consistent with high levels of this trait.
Extraversion
Captured through sociability, assertiveness, and comfort with public visibility. CEOs who frequently engage with the media, energize employees, and embody a strong public presence, such as Marc Benioff, often described as flamboyant and larger-than-life, tend to score high. By contrast, leaders who are more private or reserved, such as Daniel Ek, who openly describes himself as an introvert, typically score lower.
Agreeableness
Reflected in cooperativeness, empathy, humility, and concern for others. Clues emerge from how leaders interact with colleagues, partners, and competitors. A reputation for bluntness or ruthlessness, as sometimes attributed to Mark Zuckerberg, suggests lower Agreeableness, while leaders emphasizing collaboration and humility, such as Jensen Huang, indicate higher levels.
Neuroticism (Emotional Stability)
Refers to emotional reactivity, sensitivity to stress, and response to criticism. CEOs who remain calm and composed under pressure (such as Jeff Bezos or Larry Fink) exhibit low Neuroticism (high emotional stability). In contrast, leaders known for volatile moods or heightened stress responses, such as Evan Spiegel, tend to score higher on Neuroticism.
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In theory, personality assessment relies on a detailed self-reported questionnaire. To increase accuracy, the ideal approach would involve a 360-degree assessment, in which individuals closest to the subject (colleagues, partners, or direct reports) also complete the questionnaire on their behalf.
In practice, this is rarely feasible in an investment context.
As a result, a more pragmatic approach is to embed personality-related cues within broader, open-ended questions when engaging with management. These questions are not framed explicitly as personality assessments but are designed to elicit consistent patterns of behavior, decision-making, and self-perception.
Over time and with experience, it becomes preferable to develop a proprietary questionnaire, one that combines elements drawn from scientifically grounded frameworks with more subjective criteria, tailored to the specific traits an investor seeks to identify in a manager.
Is there a specific personality profile associated with more effective leadership?
Evidence from the Big Five framework
If we rely on the most comprehensive research based on the Big Five Index, several consistent patterns emerge.
- Assiri (2025) shows that Conscientiousness and Openness are significant predictors of core leadership practices, with Extraversion and Agreeableness contributing depending on the specific leadership dimension examined.
- Judge, Bono, Ilies & Gerhardt (2002) identify Extraversion and Conscientiousness as the most robust and consistent predictors of leadership effectiveness, providing empirical correlations between each Big Five trait and leadership outcomes.
- Judge & Bono (2001) find positive associations between leadership effectiveness and Extraversion, Conscientiousness, and Openness, a weaker positive relationship with Agreeableness, and a negative association with Neuroticism.
Taken together, these findings suggest that effective leaders tend to be socially engaged, intellectually curious, and highly disciplined. Cooperation and agreeableness appear to play a secondary role, while low emotional reactivity (high emotional stability) is a defining characteristic.
Across the literature, two traits stand out as particularly differentiating strong leaders from weaker ones:
- Hight to very high VS Low Conscientiousness
Elevated Conscientiousness appears to facilitate superior capital allocation, stronger cost discipline, and greater strategic consistency, ultimately translating into higher returns on capital. CEOs exhibiting moderate to low Conscientiousness often display a strong risk appetite and intuitive flair, but may lack the discipline required to consistently challenge intuition with rational analysis. - Low Neuroticism (High Emotional Stability)
Successful founder-CEOs tend to remain calm under pressure, handling stress and adversity with composure. In contrast, weaker performers more frequently exhibit higher Neuroticism, which can manifest as erratic, reactive, or impulsive behavior. Emotional stability is also closely linked to resilience, the ability to absorb setbacks, learn from failure, and adjust course without overreacting.
Complementary leadership frameworks
These findings are reinforced by alternative leadership research. The GLOBE CEO Study (2014) shows that the most successful CEOs consistently differentiate themselves through visionary and performance-oriented leadership behaviors, while less successful leaders score materially lower on these same dimensions.
In 2017, Robert Vinall, a successful investor based in Switzerland, was invited to share his perspective on managerial talent at the Value Investor Conference in Omaha. While emphasizing the importance of assessing CEOs and senior managers, he also outlined several personality traits he personally prioritizes when selecting managers.
Interestingly, some of the traits (i.e. charisma, strong leader) he considers less important are not fully aligned with the conclusions discussed earlier in this paper. This divergence is precisely what makes his perspective valuable. It highlights the fact that no single framework is definitive and that effective investor judgment often emerges from combining multiple lenses until one finds the framework that both resonates intellectually and proves effective in practice.
I strongly encourage readers to watch the video. It remains one of the rare instances of open, first-hand documentation on how a seasoned investor evaluates management quality in real-world decision-making.
Source: Robert Vinall’s presentation at the VIC 2017
How do leadership profiles differ across industries and sectors?
An important consideration is that different industries require different types of leaders. The personality profile that proves effective in one sector may be suboptimal or even counterproductive in another.
Empirical research shows that industry context is associated with distinct personality trait configurations. For example, the Information Technology and Media sectors tend to favor leaders high in Openness, reflecting the premium placed on creativity, innovation, and change leadership. By contrast, Industrials and Utilities are more often led by highly Conscientious, steady-handed executives, where operational discipline, reliability, and process optimization are critical.
Leaders in Financial Services typically distinguish themselves through strong analytical rigor combined with high emotional stability, reflecting the demands of risk management and decision-making under uncertainty. In Healthcare, effective leadership more frequently correlates with elevated Agreeableness, as empathy, ethical judgment, and stakeholder sensitivity play a central role.
These patterns are not merely anecdotal. Empirical evidence suggests that industry sector explains a meaningful share of the variance in CEO personality traits. In one large sample of 460 CEOs, clear and statistically significant contrasts emerged particularly between Technology and Manufacturing, as well as Finance and Healthcare across several Big Five dimensions.
Conclusion
It is important to emphasize that effective leadership exists on a spectrum, not as a single ideal type. There is no universally “perfect” CEO personality. Research from Stanford and MIT underscores this point, highlighting that each Big Five trait involves inherent trade-offs, and that an optimal personality profile depends heavily on a company’s strategy, life cycle, and operating environment.
What constitutes a strength in one context may become a liability in another. A highly structured, risk-averse leader may excel in managing a regulated utility, yet inhibit innovation in a fast-moving technology company. Conversely, a visionary risk-taker who thrives in a startup environment may introduce excessive volatility when placed at the helm of a stable, capital-intensive business. These dynamics align closely with contingency leadership theories, which argue that leadership effectiveness hinges on the degree of fit between a leader’s personal traits and the organizational or industry context.
Empirical evidence supports this view. CEOs tend to imprint organizations with their values, priorities, and behavioral patterns, and performance often deteriorates when there is a mismatch.
And you, do you pay attention to the CEO’s personality traits?