Our research shows that anxiety and depression are common among top executives.
Mariya Ivanova
Mental health leaves a mark on executives decisions
Executives diagnosed with anxiety or depression make systematically less efficient investment decisions, new study finds. But one thing appears to help: not leaving the biggest decisions to one person alone.
Decisions in business are rarely made in big leaps, but through a series of small, ongoing judgments. What happens when the people making them are not at their best?
In fact, this is far from rare. A 2022 Deloitte survey found that one in three executives regularly struggle with exhaustion and poor mental health. Nearly seven in ten said that they were seriously considering moving to a job that would better support their wellbeing.
Now, a new Nordic study is among the first to link clinical diagnoses of mental disorders among top executives to their companies’ investment decisions, and ultimately to company performance.
Two decades of data
‘Top executives have long been seen as exceptionally resilient, which is why their mental health has received little attention in research,’ says Mariya Ivanova, a financial accounting researcher and associate professor at the Norwegian School of Economics (NHH). Ivanova conducted the study together with researchers from universities in Finland and the UK.
‘Only in recent years has the topic gained more attention, largely through self-reported survey data. But such data say little about the consequences for the companies they run. That is where our study contributes.’
The study links medical records to financial data from more than 40,000 firms and 124,000 CEOs and board members in Finland.
Among them, 4.3 percent have received a clinical diagnosis of mental disorder before taking up their position. The most common were anxiety and mood disorders, including depression, accounting for almost 60 percent of the cases, followed by substance-related disorders at 16 percent.
The researchers look at how much firms actually invest, and compare it with what would be expected from their finances, growth prospects and profitability. The gap shows how far companies move away from economically sensible investment levels. In other words: how much money is used less efficiently than it could have been.
They focused on two areas:
- investments in capital such as technology, equipment, and buildings
- investments in employees
Clear patterns
When the researchers analysed the data, a clear pattern emerged. Companies led by executives with mental health diagnoses deviated more from expected investment levels, both in capital spending and staffing.
‘It was not surprising that mental health affects decision quality. What is interesting is how the effects vary across different types of investment,’ says Ivanova.
In capital investment, the tendency is to invest too little. In staffing, the opposite happens: executives tend to keep more employees than the company’s finances would suggest.
Companies should provide ongoing mental health support to all employees, and not just those at lower levels
Mariya Ivanova
Small deviations, repeated over time
Overall, firms led by executives with a history of mental health illness show about 4.8 percent more inefficient capital investment and 5.3 percent more inefficient labour decisions.
What does that mean in practice?
Ivanova highlights two examples:
- A company with around NOK 7 million in assets, roughly the typical company in the data, may allocate about NOK 30,000 less efficiently each year.
- A company that carries more staff than expected does so by around 1.5 percent of its workforce. For a firm of 70 people, that will be roughly one extra employee.
Ivanova underpins that these are not dramatic, one-off mistakes or signs of severe managerial failure.
– Rather, they are small deviations that appear repeatedly across many firms. Individually the effects are modest; their importance lies in how consistently they emerge in the data.
Although the data come from Finland, she believes the findings are highly relevant for Norway.
‘Both countries have many small and medium-sized companies with similar characteristics,’ she says.
What can be done?
What should boards and owners do?
– Notably, the differences appear only among smaller companies, where decision-making rests on few individuals. In larger firms, with more formal structures around major decisions and multiple decision-makers, the differences are not statistically detectable. That points to what organisations can actually do, says Ivanova.
According to the researcher, several measures stand out:
- clearer structures and formal decision-making routines
- involving more people in key decisions, especially in smaller firms
- better support for mental health across the organisation, including at the top
– Our research shows that anxiety and depression are common among top executives. Companies should therefore provide ongoing mental health support to all employees, and not just those at lower levels,’ says Ivanova.