[real-eyes] ceo, cfo, pants on fire?
- From: Steven Clark <kcpadfoot@xxxxxxxxx>
- To: real-eyes@xxxxxxxxxxxxx
- Date: Sun, 29 Aug 2010 06:43:59 -0500
I found this article to be very interesting and hope someone else will
enjoy reading it too.
Steve
The following is from:
http://www.paranoidprose.com/2010/08/28/ceo-cfo-pants-on-fire/
ceo, cfo, pants on fire?
By alberg
CSO
,
useful stuff
Liar liar
A recently published research paper entitled “
Detecting Deceptive Discussions in Conference Calls
” provides an interesting look at lies and the liars who tell them (in
this case,
company CEOs and CFOs) as well as a peek into the future of of lie
detection in general.
For this paper, the researchers decided to look at a group of statements
by CEOs
and CFOs in quarterly earnings conference calls held with investors.
They specifically
wanted to focus on the times when fibs may have been told on these
calls. In order
to find these occasions, they looked for cases where companies had to
restate their
financial results after the calls, or had to disclose other information
such as material
weaknesses in controls, late filings, changes to auditors, or form 8-K
filings.
The researchers got hold of all available transcripts for US quarterly
earnings conference
calls between 2003 and 2007. The transcripts were formatted in XML,
making them
a lot easier to parse. Next, they broke down the transcripts, ignoring
the “Management
Discussion” parts which are presumed to be heavily scripted and vetted
by legal,
investor relations, marketing and other corporate types before a word is
uttered.
That left the “Question and Answer” parts of the calls, which tend to be
more spontaneous
(hence providing more opportunities for questions leading to
prevarications to be
asked). Finally, the statements of the CEOs and CFOs were isolated for
analysis.
The researchers presumed that the CEO and CFO would know the true state
of the company,
thus providing them with opportunities to fib to investors during the Q&A.
After analyzing the data, they found that when executives fib…
They make more references to audience or general knowledge – “As you know…”
They use more words linked to extreme positive emotions – “The outlook
for the company
is fabulous!”
They make fewer references to shareholders value and value creation
CEOs in particular make fewer references to themselves and use more
third person
and impersonal pronouns. They also use fewer words indicating
non-extreme positive
emotions as well as fewer “hesitation words” and words indicating certainty.
Interestingly, when CFOs tell lies, they tend to use more words
indicating certainty
While the study itself was fascinating reading, I also found the
authors’ summary
of the different perspectives on deception noted by other researchers in
the field.
From an emotional perspective
, deceivers are thought to feel guilty about their deceptions and have a
fear of
being caught in their lies. This leads to negative emotions, and a
negative affect.
According to this perspective, deceivers will make more negative
comments, use more
general terms and avoid referring to themselves. Their statements will
tend to be
short, indirect and evasive.
Taking a cognitive perspective
on deception highlights the fact that it takes mental energy to lie and
keep one’s
story straight. This perspective suggests that deceptive statements will
use more
general terms and lack specific details. Again, the deceiver will avoid
referring
to themselves and will avoid mentioing personal experiences. Statements
will tend
to be shorter, to minimize the amount of keeping track that the deceiver
must perform
to make their narrative consistent.
Looking at deception from an attempted control perspective
focuses on the deceiver’s efforts to avoid making statements which would
expose
their lies. This perspective also expects deceptive statements to have
non specific
language, few self references, and short statements with little real
detail. The
deceiver may inject irrelevant information into his or her statements to
distract
their audience. If the deceiver is well prepared, there will be more
specific information,
and fewer of the natural hesitations found in normal speech. This
perspective also
looks for lexical diversity as an indicator of deception; people telling
the truth
tend to repeat themselves, while deceivers seem to use a more varied
vocabulary.
Maybe this is why it is interesting to listen to storytellers and other
“professional
deceivers.”
The final perspective on deception is that of lack of embracement
– in this approach, the deceiver feels uncomfortable telling a lie and
appears to
lack conviction in what they are saying, mainly due to the fact that
their claims
are not in line with their experience. Again, speaking in generalities,
few slef
references and short answers would be expected from a deceiver operating
under this
framework.
I had a few take aways from this paper:
It gave me a rational basis for the “gut feelings” we have when deciding
whether
a person is telling us the truth or not. I will be a lot more conscious
of the structure
and content of statements when making these evaluations.
I also see this type of research, when combined with technologies such as
pervasive digital recording
and speech recognition, as possibly marking the beginning of a time when
many of
the statements we make will be automatically dissected, analyzed and
evaluated (possibly
in real time) to indicate whether statements are true or deception. Like
any other
lie detection technology, this must be used with a clear understanding
of its limitations.
A few years ago, we were told that
voice stress analysis
would make it possible for our phones to tell us when someone is lying
in real time;
the technology has not lived up to the hype. A lot more research needs
to be done
here, but I think we are going to be hearing a lot more about this topic
in the future.
I mean, would I lie to you?
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