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.