Hubris And Greed Common Traits in Fallen CEOs

Was it perseverance or hubris that led the founders of some disgraced corporations to deviate from the law on behalf of the companies they built from scratch?

"When you're the founder, you think you can do anything and that the rules don't apply to you," says Mark Cheffers, CEO of AccountingMalpractice.com. That "can lead to behavior that is inappropriate," says Joseph Carcello, professor of accounting at the University of Tennessee.

The founders of WorldCom, Enron, Homestore, Waste Management, HealthSouth and Adelphia were all at the helm of their firms when misguided accounting and good old fashioned bad judgment took down all they had so carefully built.

Carcello has studied the trend and found that the founder or original CEO was the company’s chief executive when misconduct occurred in 45 percent of 303 fraud cases between 1987 and 1997.

However, despite this trend, most business owners/founders are hard working and honest. “There are millions of entrepreneurs who open up shop early and close late, create jobs and are good corporate citizens," says Dan Danner, senior vice president of public policy for entrepreneur group NFIB. "They're the heart blood of America."

Traits such as greediness, personal attachment to the business and a cult-like following are common to entrepreneurs who often become larger than life to their employees who are then rewarded for their loyalty, even if it is misguided.

"No one is going to say to a founder, 'Go to hell,' " says Jack Ciesielski, president of R.G. Associates, which might explain the guilty pleas of five former chief financial officers at HealthSouth.

Greed is often the bottom line. Enron CEO Key Lay, who led the company for 15 years, during which time most of the company’s alleged accounting scandals occurred. Lay sold 1.8 million shares of Enron stock over a four-year period, worth $101 million, according to a shareholder lawsuit.

You may like these other stories...

You have a big presentation forthcoming that might enable you to land a huge client for your firm. Are you sufficiently relaxed to be at your best? Let me offer a story and some observations that drive home a crucial point....
Accountants who specialize in forensic and valuation services point to electronic data analysis, or big data, as the most pressing issue they’ll face in the coming months, according to results of a new survey released...
Renaissance avoided more than $6 billion tax, report saysThe Senate Permanent Subcommittee on Investigations said on Monday that a Renaissance Technologies LLC hedge fund’s investors probably avoided more than $6...

Upcoming CPE Webinars

Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.
Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.