Feature

Third-person evasive: How CEOs deceive

David Larcker and his colleagues at Stanford have found that deceptive executives use distinct language patterns.

Cynics say it’s easy to tell when corporate executives are lying: anytime their lips move, said Nathaniel Hindman in Huffingtonpost.com. But now there’s a more precise gauge, courtesy of Stanford accounting professor David Larcker. He and his colleagues analyzed 30,000 conference calls during which executives announced their firms’ earnings. They found a distinct pattern in statements by executives whose companies later had to revise their earnings downward—a potential sign of deceptive accounting.

CEOs who are “less than truthful” tend to distance themselves from their subject matter and push responsibility onto “the team.” They also prefer “effusive adjectives” such as “great” to low-key descriptors like “good.” Fittingly enough, the word “incredible” emerges as one of the deceptive executive’s favorite modifiers.

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