"How Can You Tell When A CEO Is Lying?" article
Words To Watch Out For: 'We' And 'Our Team'
Larcker and Zakolyukina pored through the transcripts of thousands of corporate earnings calls when CEOs and chief financial officers take questions from analysts.
And then they studied the words of executives at companies that later had to restate earnings, which often happens after fraud has occurred. The researchers identified some key indicators of deception.
Zakolyukina says lying executives tend to overuse words like "we" and "our team" when they talk about their company. They avoid saying "I."
She says there's a reason for that: "If I'm saying 'I' or 'me' or 'mine,' I'm showing my ownership of the statement, so psychologically I'm showing I'm responsible for what I'm saying."
Emphasizing The Positive
Lying CEOs also tend to use a lot of words that express positive emotion — things are "fabulous" and "fantastic" and "extraordinary."
Here's what Enron CEO Kenneth Lay said when he addressed his employees at a time when the company was about to implode: "I think our core businesses are extremely strong. We have a very strong competitive advantage. Of course, we are transferring this very successful business model and approach to a lot of new, very large markets globally."
Words like that can be a form of overcompensation.
"If all my speech is 'fantastic,' 'superb,' 'outstanding,' 'excellent' and all my speech sounds like a big hype — it probably is," Larcker says.
A Speech Detector That Issues Red Flags
Larcker and Zakolyukina have put their data into a computer model — one that can issue red flags when signs of deception occur. And they've already heard from a lot of people in the markets wanting to use it.
Larcker says he received at least one critical comment that basically said: "Thanks a lot for telling the CEOs and CFOs how to lie."
http://www.npr.org/templates/story/story.php?storyId=130544236
Words To Watch Out For: 'We' And 'Our Team'
Larcker and Zakolyukina pored through the transcripts of thousands of corporate earnings calls when CEOs and chief financial officers take questions from analysts.
And then they studied the words of executives at companies that later had to restate earnings, which often happens after fraud has occurred. The researchers identified some key indicators of deception.
Zakolyukina says lying executives tend to overuse words like "we" and "our team" when they talk about their company. They avoid saying "I."
She says there's a reason for that: "If I'm saying 'I' or 'me' or 'mine,' I'm showing my ownership of the statement, so psychologically I'm showing I'm responsible for what I'm saying."
Emphasizing The Positive
Lying CEOs also tend to use a lot of words that express positive emotion — things are "fabulous" and "fantastic" and "extraordinary."
Here's what Enron CEO Kenneth Lay said when he addressed his employees at a time when the company was about to implode: "I think our core businesses are extremely strong. We have a very strong competitive advantage. Of course, we are transferring this very successful business model and approach to a lot of new, very large markets globally."
Words like that can be a form of overcompensation.
"If all my speech is 'fantastic,' 'superb,' 'outstanding,' 'excellent' and all my speech sounds like a big hype — it probably is," Larcker says.
A Speech Detector That Issues Red Flags
Larcker and Zakolyukina have put their data into a computer model — one that can issue red flags when signs of deception occur. And they've already heard from a lot of people in the markets wanting to use it.
Larcker says he received at least one critical comment that basically said: "Thanks a lot for telling the CEOs and CFOs how to lie."
http://www.npr.org/templates/story/story.php?storyId=130544236
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