Tip-offs for when CEOs lie

Trust your gut to tell you when someone’s lying, we’re told. Or, in the case of a CEO filling a conference call
with hot air, look for key words like “fantastic.”

Two Stanford University business professors have analyzed nearly 30,000 conference call transcripts to see how the use of
common euphemisms correlated with later restatements of profits.

“As you know” implies presumptions that aren’t necessarily true. Beware when something is described with
over-the-top words like “fantastic.” And be concerned by a lack of “um,” “er,” and other
terms that suggest the CEO is thinking about an answer rather than deferring to a coached line.

A summary of the study
is on The Economist’s website. The language was used by chief financial officers, too, by the way, not just
CEOs.

Now that their cover is officially blown, what do you expect? Perhaps that their investor relations people will step up their
game to compensate?

What are your overall thoughts about the trustworthiness of statements made during conference calls? Or anything from C-level
offices, for that matter?