A research paper described on the Harvard Law School Forum on Corporate Governance suggests that pressure from their CEO’s is the prime motivation for Chief Financial Officers of listed companies to manipulate their accounts. The pay and rewards of these executives does not seem to be enhanced by the manipulation but that of their CEO’s is enhanced. Also, prior to the manipulation there is an above average turnover of CFO’s in those companies where it has been detected, compared with a control group. The data all comes from the USA, but evidence from major financial scandals in other countries would suggest that the lessons are universal.
Of course we know little of manipulation that has avoided detection and the authors seem not to have tested for other motivations, such as deperate attempts to stave off corporate failure. Nonetheless, this is an important piece of work that reinforces the view that the majority of financial scandals result from over-dominant Chief Executives, without sufficient checks and balances on their behaviour, who treat company assets as their own.