I think the CEO playing as toddler has a ego stroking element to it and probably why this strategy is preferred over others. I tend to see C-levels in two groups, the alpha-male no-BS type and then the emotional manipulator type. I think both are ego pleasing (and probably both get similiar results), because the alpha gets the validation of his toughness and the manipulator gets the validation of his cleverness.

I think the latter is probably more pleasing for most personality types. You can still come off as the "nice guy" in polite company, even though you're being very demanding. Think how much warmer people like Sundar Pichai come off as compared to someone like Larry Ellison.

I also think there's a salesmanship aspect here. Its easier recruiting if you sell your company culture as a "nice" place led by a "nice" leadership. I think its a harder see to say "Look we're assholes here but the job and pay is good."