Telltale Signs A CEO Is Lying (Or Not)

Studies

from the moving-his-lips? dept

NPR has a story about a study that tried to figure out indicators that a CEO is lying. The researchers went through the statements made by executives on earnings calls for companies that later had to restate earnings, and found a few key signals that indicate lies. The researcher’s own summary:

We find that answers of deceptive executives have more references to general knowledge, fewer non-extreme positive emotions, and fewer references to shareholders value and value creation. In addition, deceptive CEOs use significantly fewer self- references, more third person plural and impersonal pronouns, more extreme positive emotions, fewer extreme negative emotions, and fewer certainty and hesitation words.

Honestly though, reading through this, it seems pretty difficult to use this to really come to any serious conclusions. For example, one of the indicators is that:

lying executives tend to overuse words like “we” and “our team” when they talk about their company. They avoid saying “I.”

The argument is that the CEO doing so is trying to avoid responsibility for the statement, but couldn’t it also be that they actually appreciate the work of the team around them? My initial reaction to a CEO who uses “I” repeatedly is that he or she is hogging the credit and not a good leader.

That said, some of the other parts do make sense, such as answering a different question than the one asked. There was an example given of that:

For instance, in 2002 NPR interviewed Computer Associates CEO Sanjay Kumar, who later went to prison for securities fraud, about his company’s auditing practices.

Here’s what he said: “There’s no one out there today in the world of public companies who has the former chief accountant for the SEC running their audit committee. We do. There’s no one out there who has the pre-eminent governance leader, professor [Jay] Lorsch, for example, running their governance committee. We do.”

In other words, Kumar was asked, “Can your books be trusted?” And he replied by saying, “We hire the very best auditors.” Larcker says that can be a big warning sign.

Finally, the things to worry about are CEOs who use extremely positive wording on things:

“If all my speech is ‘fantastic,’ ‘superb,’ ‘outstanding,’ ‘excellent’ and all my speech sounds like a big hype — it probably is,” Larcker says.

Of course, if that’s true, then Steve Jobs is the worst of the worst of the worst when it comes to lying CEOs. As an example, in the period of about thirty seconds during the iPad launch, he used the words “extraordinary… the best experience ever… it’s phenomenal… it’s unbelievably great… way better…” etc. Which I think sort of points out why this kind of research, by itself, is pretty tough to be used to indicate anything.

Filed Under: ceos, lying, studies