Taming the narcissist

We investigate whether corporate governance constrains the agency costs associated with CEO narcissism. Narcissistic CEOs are linked to lower earnings quality, greater risk‐taking, and inefficient overinvestment. However, these effects vary substantially with board structure. Boards characterized by low diversity and excessive director compensation are significantly less effective at constraining the adverse consequences of CEO narcissism, whereas more diverse boards with appropriately incentivized directors mitigate these effects. The strongest adverse outcomes occur when low board diversity and excessive director compensation coexist. Our findings highlight the central role of governance design in limiting personality‐driven distortions in corporate decision‐making.