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Embellish, Misremember or Lie: Whatever You Call It, It Will Eventually Come Back to Bite

The opinions expressed by columnists are their own and do not necessarily represent the views of

The reactions to revelations of NBC Nightly News anchor Brian Williams “misremembering” events in Iraq have been harsh and swift. But while the scandal of Mr. Williams’ dishonesty is exceptionally striking given the reverence the public holds for the man or woman who delivers the news, the fact is, telling the truth matters across a range of business industries.


In our recent research, “The Agency Costs of Managerial Indiscretions: Sex, Lies, and Firm Value,” we examine executives accused of resume fraud as well as other breaches of personal integrity. Interestingly, relative to the other categories, such as substance abuse and sexual misadventure, the results are particularly severe for cases of dishonesty.

We found that over the last ten years, an average of five large, publicly traded firms annually disclosed that at least one of their top executives or directors embellished their resumes. The average value loss per company is $73.2 million at the announcement of the lie. Not surprisingly, about 59 percent of these professionals lose their jobs over it.

For example, Yahoo!’s market value plunged $390 million when news that then-CEO, Scott Thompson, falsely claimed he held a computer science degree from Stonehill College. Mr. Thompson was fired almost immediately amidst shareholder pressure. When Veritas Software discovered that CFO Ken Lonchar also falsified his personal credentials, Merrill Lynch downgraded the company, causing an immediate drop of $906 million in the company’s value. Mr. Lonchar was also fired. Ironically, Veritas is Latin for truth.


The message is clear: Wall Street also cares about the truth. Upon learning of Mr. Lonchar’s actions, Merrill Lynch analyst Scott Phillipsstated, “Our first concern is that the CFO's falsification of his educational credentials could suggest the financials are suspect.” Our empirical evidence strongly supports this position: personal dishonesty impairs corporate reputation and ruins the trust and confidence that investors, the board, subordinates, and customers have in management.

Like the examples we see of corporate resume fraud, Mr. Williams’ inaccurate report of his helicopter ride to bolster his credentials as a wartime correspondent backfired. Williams’ public dishonesty has diminished his credibility as well as that of NBC News. NBC feels that keeping him as the face of the nightly news would create large, costly trust issues with its clients (viewers). When you’re the face of the organization, such behavior reflects upon both the individual and the organization. This doesn’t just hold for TV personalities, but extends into the boardroom as well.

What is the moral of the story for Mr. Williams and others who fabricate and embellish to get to the top? It might take your career to new heights, but the false foundation will eventually collapse. And this collapse is far more painful for both the individual and the company than the lie could ever be worth. Embellishing, misremembering, or lying — whatever you call it, it will eventually come back to bite.


Brandon N. Cline is the BancorpSouth Professor of Finance in the Department of Finance and Economics at Mississippi State University. Adam S. Yore is an Assistant Professor of Finance in the Department of Finance at Northern Illinois University.

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