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Why a reduction in CEO compensation lead to CEO' commit fraud especially with top line entries.?

Why a reduction in CEO compensation lead to CEO' commit fraud especially with top line entries.?

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Answer #1

CEO is the top executive of any company and sole business operator of any company. CEOs compensation may not be the only factor leading CEO' commit frauds, however, this might be one of the crucial factors.

It is likely that CEOs and other executives may commit such financial or accounting frauds when their own personal utility from the fraud surpasses the stimuli/ motivation that they receive from their compensation doing the right job.

Also, stock options are one of the most important parts of any CEOs compensation which might lead them to manipulate the performance of the business to shoot up the price to yield higher benefits.

This will work out in a way as they might manipulate the top line entries of any business as investors are also concerned about them which will lead to higher investments - higher prices and they can cash out their stock options easily at higher prices.

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