What are the qualities that shareholders look for in a director candidate? Do beauty and the appearance of competence in a candidate affect corporate elections? In our recent working paper, we address these questions by gathering ratings of various dimensions of facial appearance based on annual report photographs of corporate directors who are candidates for a board position or are up for re-election. We assume that shareholders who vote on a director candidate can rely on information about the director’s education and experience as well as about the firm’s past performance, all of which is presented in the annual report and available prior to the (re-)elections votes. From the relevant psychology literature, we learn however that individuals often make up their mind about a candidate from a simple glance at the candidate’s face. This so-called System 1 brain process can only be corrected if the individual is aware of the bias incurred and consequently engages in a slow and effortful System 2 process (Todorov et al., 2005). Surprisingly and in line with studies on political elections (eg Berggren et al., 2010; Todorov et al., 2005), our results suggest indeed that shareholders consider a certain number of visual traits important for a candidate, and rely on these imperfect heuristics when voting for them.

Is it beauty or the appearance of competence that shareholders rely on when making up their mind? A number of research papers examine the effect of beauty on electoral success (eg Berggren et al., 2010). The reasons cited for relying on beauty comprise deselecting leaders suffering from diseases or choosing good-looking candidates for the pleasure of looking at them. There is indeed some evidence that beauty matters in the corporate context: for instance, beauty is reflected in a corresponding premium in top manager’s remuneration (Hammermesh and Biddle, 1994). A separate stream of the literature on political elections focuses on perceived competence (eg Todorov et al., 2005). A recent empirical study suggests that the appearance of competence positively affects both CEO selection and the size of her compensation contract (Graham et al., 2017). Strikingly, we find that facial beauty seems not to be a driver of director elections in a corporate setting. Our results rather suggest that shareholder rely upon inferences based on perceived competence (among others), which they consider to be necessary in the position of director.

Does facial appearance matter more for executive than for non-executive directors? And does facial appearance matter more in appointment elections or in re-elections? We argue that voting on executive directors may attract more attention from shareholders, as executives bear more responsibility for the firm’s performance. Indeed, we find that the correlation between facial appearance and voting dissent holds for this group of directors, but not for non-executives. When considering the differences between appointment elections and re-elections, we presume that in the latter situation, shareholders have more information at their disposal concerning a director’s track record and the respective firm’s performance. Our results suggest however, that shareholders rely more on facial appearance in the setting of director re-elections than of first appointment elections, supposedly as they are more familiar with the looks of directors when they are up for re-election. 

Subsequently, we examine the role of gender on voting dissent: while female candidates experience in general less voting dissent than their male counterparts, their facial appearance (including beauty) does not affect their election results. We attribute these findings to the idea that gender diversity at the board level is an important corporate goal and that top female directors are still in short supply.  

In sum, our working paper suggests that shareholders use imperfect heuristics when voting for corporate director elections: they rely upon inferences based (among others) on perceived competence, but not on facial beauty. Shareholders rely more on facial appearance in the setting of director re-elections than of first appointment elections, which may reflect that they are more familiar with the looks of directors when they are up for re-election. Likewise, we find that facial appearance matters more for executive directors than for their non-executive counterparts. While female candidates can expect a lower voting dissent in general, they cannot count on their physical appearance.

Philipp Geiler is Associate Professor of Corporate Finance at Department of Economics, Finance and Control, EMLYON Business School, Luc Renneboog is Professor of Corporate Finance at Department of Finance, Tilburg School of Economics and Management, Yang Zhao is Lecturer in Banking and Finance at Newcastle University Business School.