CEO Semantics

On my way to work several weeks ago, I was listening to a special on NPR about “How Can You Tell When a CEO is Lying.” According to the piece, two researchers from Stanford University took it upon themselves to study thousands of corporate earnings calls and come up with a way to tell when executives are lying.
 
The researchers found that when CEOs and CFOs take questions from analysts after an earnings call, a few key indicators of dishonesty include words such as “we,” “us,” or “the team” when talking about the company. The word “I” is rarely used, as executives try to deflect any ownership of what is being said so they personally are not held responsible for anything. Additionally, the overuse of words that express positivity can be a form of overcompensation. Words such as “excellent,” “fantastic,” and “outstanding” also portray more hype than fact.
 
In this day and age, there’s no exact science to interpreting a CEO’s semantics, but there are certainly key terms to be cognizant of.  In our line of business, it is important to get to the point of important topics without using fluffy adjectives.  Credibility is key when it comes to communicating with investors and that starts with avoiding hyperbole.

 

PondelWilkinson, investor@pondel.com
 
 

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