In Parts 1 and 2, I addressed common traits of deceptive people and common methods of lying in the business world, respectively. In this final installment, we will consider the potential effects when those from Parts 1 & 2 graduate into the spotlight and rise through the ranks of corporate America.
It is obvious that as individuals advance in position with an organization, they acquire more responsibilities, more trust and more access to do some very serious damage—not only to the company, but to the economy and even the public’s confidence in the systems that are supposed to help prevent such large corporate and organizational frauds. Management and owners account for over 50% of reported fraud, but the median dollar loss created by those in higher positions is five to six times greater than by losses caused by those in subordinate roles. As for catastrophic damage perpetrated by power, I only need to type two words to make my point and spare you a history lesson: Enron and Madoff.
Harvard and Columbia Universities also find the topic of, and psychology behind, lying in business important enough to do research studies on the subject. One study’s experiments revealed that ‘low-power’ individuals show the expected emotional and behavioral signs of deception; in contrast, powerful people demonstrated little to no evidence (emotionally, physiologically, behaviorally) of lying. Power acted more as a buffer that seemed to allow the powerful to lie significantly more easily and effectively. It seems that, while power does not lead to lying, dishonesty seems to come easier to those in power. Is there, perhaps, a correlation between climbing the corporate ladder and being able to conceal one’s true motivation? Once at the top, do those individuals then find it easier to abuse and misappropriate assets for their own motives?
Disturbing as well is the influence and impact on those learning from such “leaders," because working for a deceitful boss can be dangerous territory. For those in that unfortunate situation, the “tone-at-the-top” challenges everyone’s ethics and moral compass—and negatively influences those who will chose to follow the same path in a means to succeed or advance.
This is where whistle-blower policies, employee hotlines and boards of directors come into play. Employees need an outlet and safe haven to feel open and safe enough to report abuse occurring and being conducted by those that have power over them in the organization.
I’ll finish my series on lies with a sobering example—which demonstrates that lying in business can ultimately result in the loss of not only dollars, but of human life, whether based upon efforts to avoid discipline or embarrassment, the pressures to perform, or just pure greed. During a congressional hearing in 1994 on the health risks of smoking, executives from the seven largest tobacco companies admitted that there “may be” some health risks to smoking, but denied that cigarettes were addictive or that they manipulated nicotine levels to make them more so. According to written testimony submitted at that time, the CEO of R.J. Reynolds stated “Cigarette smoking is no more ‘addictive’ than coffee, tea or Twinkies." Lie to me.
Author: Richard C. Gordon, CPA/ABV/CFF, CFE, CGMA, Director of Forensic and Valuation Services