Corporate Charlatans: Seven Signs Your CEO Could Be Lying

CEO dishonesty For stockholders, earnings conference calls offer a rare opportunity to hear about their companies straight from the senior executives. But while corporate leaders tend to paint glowing pictures of their companies' prospects, these optimistic futures sometimes turn out to be little more than wishful thinking and hot air. Faced with the possibility of C-suite dissembling, some investors have wondered how to determine the honesty of their executives -- and the safety of their investments.

Analysts at Stanford University may have discovered a technique for gleaning useful information out of the dross of misleading earnings conference calls. David Larcker and Anastasia Zakolyukina, two researchers at the Stanford Graduate School of Business, reviewed executive statements from more than 29,000 conference call transcripts. Their recently published academic paper, "Detecting Deceptive Discussions in Conference Calls," identifies several behaviors and word choices that a dishonest or misleading CEO might employ when discussing his company.

Here are seven signs that could indicate a corporate executive (or your boss, for that matter) is being less than totally honest.

"We," Not "I"
You don't get to the head office by being a shrinking violet, and corporate execs are usually willing to take more than their fair share of credit when things are going well. So, if a company's CEO is suddenly eager to share the responsibility for a company's performance, it's a strong sign that something may be wrong. Larcker and Zakolyukina found that dishonest CEOs tend to use words like "we," "us," and "our," instead of "I," "me," and "mine." The researchers theorized that, in addition to reducing some of the CEO's personal responsibility, these words also suggest that the executive in question wants to distance himself from what he is saying.

"Everybody" Knows
Tied in with the tendency to reduce responsibility, Larcker and Zakolyukina also determined that dishonest CEOs also tend to diffuse their own authority. Rather than claiming special knowledge about business, they often defer to common knowledge by using phrases like "you know," "everyone agrees," "others would agree" and "shareholders know." While vague, these sorts of statements sound somewhat authoritative. At the same time, referring to "everybody" further reduces the CEO's personal responsibility.

Super Duper Excited
Jeff Skilling aside, most CEOs try to appear dignified and somewhat restrained when addressing their stockholders. Part of this restraint plays out in their word choices: When discussing the state of their companies, honest CEOs tend to use specific, measured terms that have clear-cut meanings. Dishonest CEOs, on the other hand, are more likely to be effusive in their praise. Rather than using words like "good," "promising" or "impressive," they will indulge their inner cheerleader with terms like "flawless," "unassailable" and "phenomenal." The idea is that, the more exaggerated the word, the more intense its meaning and the more sincere it sounds.

The Worst of the Worst
Larcker and Zakolyukina's findings suggest that a dishonest CEO addressing his stockholders will tend to be on an emotional roller-coaster. When things are great, they're "phenomenal, "and when they're bad, they're equally intense. Rather than playing their cards close to the vest with subtle words like "tough," "difficult" or "problematic," dissembling executives go for the gusto, using terms like "annihilating," "heartbreaking," "mortifying" and "wretched" when the chips are down.

A Dirty Mouth Equals a Dirty Bottom Line?
Following the logic that strong language suggests honesty, foul language would seem to be absolute proof of one's sincerity. At least, this seems to be the game plan for many lying CEOs: According to Larcker and Zakolyukina, dishonest executives tend to swear more than honest ones, often employing soft curses, like "screw" and "hell."

Honest CEOs tend rely on facts, figures and low-key analysis to back up their presentations, but lying execs often resort to the tried-and-true "homicidal maniac" method for demonstrating sincerity. Larcker and Zakolyukina found that dishonest CEOs were far more likely to use words like "hate," "kill," and "crush." Actually, this makes a lot of sense: Nobody every questioned Ted Bundy's sincerity, did they?

You Trust Me, Right?
As part of the tendency toward extremely positive language, Larcker and Zakolyukina also found that many dissembling CEOs used synonyms for "honesty" to convey their truthfulness. By peppering their earnings reports with words like "genuinely," "truly," "sincerely" and "in truth," the execs seem to be demonstrating that they are completely trustworthy. Then again, as the old saying goes, "Never trust a man who says 'Trust me'."

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Axel f. olsen

When a C E O make 400 dollar an hour that i guess entitle them to lie and get by with it .

October 27 2010 at 2:07 PM Report abuse rate up rate down Reply

You Do Not need 7 signs to tell if they are lying ! Its when they OPEN THERE MOUTH there lying !

October 24 2010 at 3:28 PM Report abuse rate up rate down Reply

Big lies, big bonus.

October 24 2010 at 8:51 AM Report abuse +1 rate up rate down Reply

We blame the higher ups but nothing would happen if other people did not also participate. There was a study done where people would electrocute other people because they were told to do so by their boss even though they new they may potentially kill the other person. (what they did not know was that there was no real person on the other end of the experiment just recordings or someone in serious pain) So while listening to another person screaming in pain they continued to aply the electricity because their boss told them to. Until employees get a backbone and tell their bosses no these problems will continue. People are too worried about their own paycheck though so they participate in the bad behavior. Folks you can point fingers all you want but you might just be part of the problem!

October 24 2010 at 8:50 AM Report abuse +4 rate up rate down Reply

As an individual who just received an MBA I have a problem with this study. The trend in business for the last decade has been getting top managers and all others throughout the organization to look at the org as "we" and not "I". Stanford wants to bash this as a sign of lying???? Everything we have learned is about "we" not "I"! Stanford you better check what the business trends are first before you label behavior. Corporations have spent billions of dollars trying to get their people to look at the company as "we" and not "I"!! A team is a team, good news or bad!

October 24 2010 at 8:36 AM Report abuse +3 rate up rate down Reply

What a waste of time this article is. I can't believe they actually had people in Stanford University making a study of this double-speak and "spin" BS put forth from CEO's? Just a remarkable waste of time and energy.

October 23 2010 at 11:02 PM Report abuse rate up rate down Reply

how do we tell if a politician is lying? his lips are moving? is this okay with everyone that we have a trillion dollar national debt and our dollar is based on nothing? just wondering?

October 23 2010 at 7:47 AM Report abuse +6 rate up rate down Reply

steve burd ceo of safeway is one of the biggest crooks. he uses his safeway foundation to cover for all the bad things he does. i am sure he says well i am giving money to charity so everyone should leave me alone.

October 22 2010 at 9:08 AM Report abuse +2 rate up rate down Reply

The same way you tell when a republicon, CONservative or libertariCON is lying, their lips are moving. Of course when a teabaggers lips are moving they are doing something else. The teabaggers make so little sense it is impossible to tell if they are lying. There comments are all indecipherable gibberish.

October 22 2010 at 2:50 AM Report abuse +1 rate up rate down Reply
2 replies to mallycj's comment

so, you are happy with a trillion dollar national debt? and a dollar that's based on nothing? and career politicians who live a life of luxury while they wreck the economy and legislate everything for us while exempting themselves??? yes????

October 23 2010 at 7:49 AM Report abuse +8 rate up rate down Reply

sorry to hear you think your party does not lie...you really do have your head in the sand!

October 24 2010 at 8:29 AM Report abuse +8 rate up rate down Reply

WELL ..... the first clue was....his lips were moving.

October 22 2010 at 2:05 AM Report abuse +4 rate up rate down Reply