Appearance significantly influences the compensation of chief executive officers in the banking sector.
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In American banks, CEOs with more attractive facial features earn, on average, one million dollars more per year than their less appealing colleagues.
This insight comes from a recent study conducted by researchers from the University of Vaasa and Hanken School of Economics, Finland. The study published in the Journal of Economics and Business examined the connection between the attractiveness of CEOs' facial features and their compensation in the banking sector.
"CEOs who are more attractive, on average, receive an annual total compensation approximately 24 percent higher than their less attractive colleagues," says Sami Vähämaa, professor of accounting and finance at the University of Vaasa.
Vähämaa's research team included Mikko Ranta, associate professor of accounting, and Shaker Ahmed, project researcher from the University of Vaasa, along with Emilia Vähämaa, associate professor of finance from Hanken.
In their study, Vähämaa and his team talk about a beauty premium, that is extra compensation given to employees based on their pleasing appearance. When comparing individuals in the same profession and position, it has been observed that attractive employees, on average, earn more.
The research dataset included 167 U.S. banks and 272 individual CEOs.
The researchers employed machine learning to objectively assess the facial appearance of the bank CEOs. Mikko Ranta constructed a machine-learning model for the study, which evaluated the CEOs' appearances on a scale from one to five.
The attractiveness scores generated by the machine learning model were based on the subjective perceptions of beauty by a large group of people. A training dataset was created, consisting of a large number of facial images and subjective evaluations of the individuals' appearances.
The study revealed that the beauty premium in CEO compensation cannot be explained by demographic factors such as age, gender, or ethnic background. Therefore, the beauty premium, an extra reward based on pleasant appearance, exists even in the high paying CEO job market. ■