Beauty and Appearance in Corporate Director Elections

The impact of appearance on the outcomes of political elections is attributed in the psychology literature to an instantaneous, unreflective and effortless brain process that can only be corrected by engaging consciously in a slow and effortful follow-up process going beyond appearance but focusing on political ideas, intentions, and vision. The question in our paper is whether shareholders who vote on the (re)election of directors on corporate boards are also liable to appearance biases or rationally consider the qualities needed by an executive or non-executive director. We investigate the role of a number of facial traits (including beauty and perceived competence) on the voting outcome for both male and female directors, while considering the difference roles on the board (CEO, chairman, other executive and non-executive directors) and first appointment or re-elections. Moreover, we scrutinize differences between the prevalence of retail- and institutional investors, assuming that the latter have larger incentives to conduct extensive research about a director candidate and thus that they are less likely to rely on inferences from facial appearance.

For our analysis, we hand-collect from the annual reports the photos of the board candidates and perform an experiment whereby independent raters judge the candidates on five dimensions (beauty, competence, trustworthiness, likability, and intelligence). We exclude the director elections that took place over the last decade in order to avoid possible biases stemming from the recognition of the candidates, and also ensure that most raters are from different country as the board candidates. For each director (re-)election, we collect the total number of favorable, against, and abstained votes.

Our results on the overall appearance score show that facial appearance does affect director elections. When dissecting overall score into the five dimensions, we find that directors who look more competence, trustworthy, and intelligent receive more favorable votes. This implies that shareholders regard observed director traits as important and that they use imperfect heuristics on looks (such as appearance of competence) as proxies for the real traits. In contrast to the case of political elections, physical beauty does not appear to affect corporate elections. With respect to female candidates, we observe that neither their physical beauty nor any other aspect of appearance affects the voting dissent. Lastly, we also document that investors with high equity stakes are less likely to rely on inferences from facial appearance, presumably because they perform more research on the directors' performance and background than small investors.

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Luc Renneboog is a Professor of Corporate Finance at Tilburg University and a research fellow of the CentER for Economic Research (Tilburg), and an ECGI Research Member.

Philipp Geiler is an Associate Professor at EMLYON Business School.

Yang Zhao is a Senior Lecturer in Financial Data Analysis at University of Liverpool.

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