Our paper explores the paradoxical effects of CEO paranoia on organizational decision-making and stakeholder relations by mapping out a three-phase process that illustrates the progression from a CEO's paranoid tendencies to organizational effects. Initially, we identify heightened vigilance and biased interpretation as primary socio-cognitive outcomes of paranoia at both individual and interpersonal levels. These outcomes precipitate a paradoxical approach to decision-making that is marked by both cautious and proactive behaviors. We further suggest that paranoia influences the manner in which CEOs engage with stakeholders, prompting a drive for unity against challenges while maintaining a strategic distance to preserve autonomy. We further theorize that while moderate levels of CEO paranoia can enhance strategic adaptability and stakeholder value appropriation through early threat detection and balanced stakeholder engagement, excessive paranoia may impede strategic change and deteriorate stakeholder trust. We also discuss personal, situational, and organizational factors that moderate the effect of CEO paranoia on socio-cognitive outcomes. This study highlights the need for theoretical frameworks that accommodate both the constructive and destructive potentials of leader psychology. It also aims to inform organizational leaders and policymakers on the optimal calibration of paranoia within leadership to leverage its potential while avoiding its detrimental excesses.
