New Research Suggests Companies Can Create More Value by Hiring Leaders Who Care About What Is Hardest to Measure
A new academic paper by three leading corporate governance and executive compensation scholars finds that companies pursuing both financial and goals beneficial to society may benefit from hiring executives who are personally committed to difficult-to-measure objectives such as innovation, employee engagement, customer trust, or social impact, rather than trying to promote this process through financial incentives. Study Suggests Need to Select Leaders Based on Compatible Values
Implications for Management
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A new working paper, "The Value of Non-Value-Maximizing Managers," by Pierre Chaigneau of Queen's University and the European Corporate Governance Institute (ECGI), Alex Edmans of London Business School, CEPR, and ECGI, and Nicolas Sahuguet of HEC Montréal and CEPR, challenges conventional thinking about executive compensation, corporate purpose, and stakeholder management. If true, the principles could reshape thinking of incentives for other management as well.
Study Suggests Need to Select Leaders Based on Compatible Values
Published in June 2026 through the Social Science Research Network (SSRN) as a research working paper, the study concludes that companies may create greater value by hiring leaders who are intentionally biased toward important but difficult-to-measure objectives, such as innovation, culture, employee engagement, customer loyalty, reputation, or environmental and social impact, rather than relying on incentives to promote those priorities. Doing so allows boards to use strong financial incentives tied to profits without risking the neglect of other critical drivers of long-term value.
The findings have important implications for executive selection, compensation design, stakeholder capitalism, ESG, and enterprise engagement. In particular, the research suggests that organizations should pay as much attention to leadership values and organizational culture as they do to incentive plans. When important outcomes cannot be measured accurately, the most effective solution may not be a more sophisticated scorecard but rather selecting leaders who genuinely care about those outcomes.
The authors employ a formal economic principal-agent model rather than survey or archival research. The model examines situations in which companies pursue multiple objectives, such as profits and societal impact, but can measure one objective much more accurately than the other. They then analyze how boards should optimally select leaders and design compensation systems under those conditions. The study is extended to a market-level model that examines how different firms should match with different types of executives based on their measurement capabilities and strategic objectives.
Implications for Management
Assuming that the logic of this paper applies to all leaders:- Leadership selection becomes a strategic advantage. Organizations should assess candidates not only for skills and experience but also for their demonstrated commitment to culture, innovation, people development, customer experience, or other strategic priorities.
- Not everything important should be incentivized. Attempting to measure and reward every leadership behavior can create gaming and unintended consequences.
- Values can substitute for metrics. When outcomes are difficult to quantify, selecting leaders with aligned values may be more effective than creating complicated scorecards.
- Compensation plans can remain simpler. Rather than adding dozens of ESG, engagement, culture, or customer metrics, firms can focus incentives on overall business performance while relying on leader selection and culture to support other objectives.
- The same logic applies throughout the organization. Companies often promote managers based on technical competence while overlooking values and leadership philosophy. The study suggests that organizations should pay closer attention to the intrinsic motivations of supervisors, directors, and executives whose decisions affect culture and stakeholder relationships.
- Culture is a talent-selection issue as much as a training issue. Organizations that consistently hire and promote people who value customers, employees, innovation, and collaboration may require fewer formal controls and incentives.
- Strong financial incentives are not evidence of shareholder primacy. They may simply be the mechanism used to balance leaders who already possess strong intrinsic commitment to people, purpose, or impact.
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