Thursday, August 27, 2009

Hidden Aggravator Of Corporate Fraud: CEO Ego Stroking From Media

The article discussing it, "Ego And The CEO", comes from the Globe and Mail:

Which is the biggest red flag for a potential accounting fraud: Bad corporate governance, an overinflated share price or too many stock options?

None of the above, according to a new study by researchers from three Canadian universities.

They argue that the biggest risk factor for fraud is a CEO with a truly oversized ego....
It makes sense. People who are puffed up either get the idea that they can pull magic rabbits out of hats, making any rule-breaking apparently "harmless," and/or feel pressured to live up to the hype even if it requires chicanery to do so.

Back in the olden days, many a CEO shunned publicity. That may have been the result of seeing the same lesson taught in the 1920s.

Thankfully, many value companies are below the publicity radar. Many CEOs of value companies are "below temptation." It makes for a relatively nice world, if not necessarily Arcadiaesque.

Note: I got this article because it was quoted in today's edition of the Casey Research Daily Dispatch


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