Briggs: Are CEOs snowflakes?

Despite the mild winter, there's been a lot of talk about snowflakes lately.

No, not the kind that fall — or, more recently, don't fall — from the sky. I'm talking about the usage of the word that refers to fragile, oversensitive people who can't take criticism or get over perceived slights.

Calling someone a snowflake has become a popular insult in recent months, particularly in the political realm. Supporters of President Donald Trump, for instance, have adopted the word to refer to people who are struggling to accept the November election. Urban Dictionary, meanwhile, cites Trump himself as an example of a snowflake.

But a new study suggests we might be looking for snowflakes in all the wrong places. Chief executives are among the biggest snowflakes of them all — and their snowflakery might be hurting companies and shareholders.

CEOs, it turns out, place a high level of importance on winning awards, according to a paper accepted for publication in Strategic Management Journal. And when a competing CEO wins an award, the losing CEOs often overcompensate by making big, bold — and bad — decisions.

"They're people, right? So they're subject to all the emotions we experience every day," said Wei Shi, an assistant professor of management at Indiana University's Kelley School of Business, who co-authored the study.

The authors, also including Yan Zhang and Robert E. Hoskisson of Rice University, found that CEOs who lost out on awards to competitors conducted 22 percent more acquisitions in the post-award period than they did before they were passed over.

Acquiring another company is one way for a CEO to increase the size — and status — of their company. Overlooked CEOs tend to pursue larger and riskier deals, many of which prove detrimental. Or, as the study says, "Acquisitions driven by competitor CEOs’ pursuit of high social recognition and status in the post-ward period are likely to be associated with less favorable stock market reactions."

To draw their conclusions, the authors compiled a list of more than 200 executives who won awards from Business Week, Financial World Gold/Silver Awards, Forbes, Chief Executive, and Harvard Business Review between 1996 and 2010. They then identified those CEOs' competitors by finding similar size companies that produce or sell the same products.

Not only did the losing CEOs make more acquisitions after getting passed over for awards, but they also bought larger companies, according to the study. The value of acquisitions made by losing CEOs in the post-award period was 156 percent higher than deals the same CEOs made before their competitors won awards.

Getting bigger, Shi said, is a quick way to get noticed.

"For CEOs leading large companies, they have the highest recognition," Shi said. "Acquisitions provide an alternative channel for CEOs who haven't won awards to keep up."

The study did not cite specific examples of CEOs who made acquisitions after failing to win awards. It acknowledges — and controls for the reality — that mergers are driven by a wide range of factors beyond the egos of chief executives.

The authors did not interview CEOs about their findings, instead relying solely on data. Nonetheless, Shi said he's confident the results show CEOs feel stung when they miss out on recognition and they look for ways to reach the status of their more decorated competitors.

"CEOs are a group of select individuals," Shi said. "They strive for success. They couldn't become CEOs if they didn't have some special qualities. They pay attention to their own social standing relative to their peers."

The failure to win awards likely has the greatest impact on runners-up, according to the study. The authors relate this finding to past research that shows "Olympic silver medalists typically feel worse than bronze medalists because they were closer also-rans to gold medalists."

So why does this research matter? The authors suggest shareholders and board directors should dig deeper to determine the motivations behind CEOs' push for acquisitions. They also suggest directors should pay close attention to the emotions of CEOs after their competitors get recognized for major accomplishments.

"After a CEO has not won an award, a CEO could have envious feelings," Shi said. "Such envious feelings can drive the CEO to engage in acquisitions or some other strategic moves that can benefit the CEO's own interest, but not the interest of shareholders."

In other words, beware of snowflakes running your company.

Call IndyStar business columnist James Briggs at (317) 444-6307. Follow him on Twitter: @JamesEBriggs.