WHERE HAVE ALL THE NEIGHBORS GONE?<\/p>\n
KEEPING UP WITH THE CEO JONESES<\/p>\n
(By Joseph W. Koletar<\/a>) When someone hits the lottery by blind luck, peace and happiness spread throughout the land, right?<\/p>\n Perhaps not. Perhaps all that happens is that the fires of jealousy get fueled.<\/p>\n The Wall Street Journal<\/em> of February 17, 2016 (page A-3), reported some interesting \u201ccollateral damage:\u201d<\/p>\n \u201cLosers in Lottery: Neighbors of Winners,\u201d by Ben Leubsdorf<\/p>\n According to the article, research by the Federal Reserve Bank of Philadelphia found a significant increase in bankruptcies among neighbors of new lottery winners. Their theory is such people felt a need to \u201ckeep up\u201d with their newly-wealthy neighbors and became financially stressed by the effort. The research was based on a study of a Canadian Province, and detailed the actions of winners and their neighbors over a period of ten years. The study eliminated areas with more than one lottery winner, and also lottery winners who later declared bankruptcy themselves. (Such things appear to actually happen.) Researchers chose to refer to this phenomenon as \u201c\u2026the link between income inequality and financial distress.\u201d<\/p>\n All of this is fine and good, but what does it tell us about \u201cC\u201d suite fraud? What can the two disparate situations possibly have in common? Our hypothesis is simple \u2013 it depends on how you define \u201cneighbor.\u201d In the case of the lottery winners it was physical proximity. Our approach, to the best of our knowledge, is unique \u2013 what if one were to define \u201cneighbors\u201d as persons of similar hierarchical and status dimensions? By eliminating physical proximity we expand the concept of \u201cneighborhood\u201d to the world.<\/p>\n CEOs and CFOs know these \u201cneighbors\u201d very well: they travel in the same circles; they attend the same conferences; they may have\u00a0gone to\u00a0the same, or competing, schools; they often sit on the same boards; they compete with each other in terms of business and public status; and some put a premium on \u201cwinning.\u201d Unfortunately, the latter desire\/compulsion can lead to misconduct of the first rank. Early in our co-authored book, A.B.C.\u2019s of Behavioral Forensics<\/a><\/em>, listed prominently among the fraud perpetrator\u2019s motives is, \u201cStatus: \u2018Keeping up with the Joneses, fame, or fear of losing status.\u201d (p.5)<\/p>\n Such considerations are hardly new. The economist Frederick Herzberg discussed, over fifty years ago, his theory that money has both an absolute and a relative value. Its absolute value is simple \u2013 five dollars is more than one dollar. In terms of relative value a purely psychological value emerges. A short example may suffice to illustrate this dynamic:<\/p>\n Bob takes a new job for $50,000 and is pleased with the salary, until he finds out Sue got an identical job in the same company at the same time for a starting salary of $60,000. At this point Bob becomes unhappy with the same $50,000 salary that once pleased him. It is the \u201claw of social comparisons\u201d at work, first expounded by social psychologist Leon Festinger in 1954, that drives competitive behavior with one\u2019s peers (or neighbors, for that matter).<\/p>\n Do \u201cC Suite\u201d executives behave in this manner? Recent history suggests the answer is \u201cyes.\u201d From Bernie Madoff (serving his 150-year sentence for perpetrating a massive Ponzi scheme) to Jeff Skilling (former CEO of Enron now in jail) to countless others we see again and again the behavior of already wealthy people trying to gild the financial lily by any means necessary. It seems to be a primal need that defies logical explanation.<\/p>\n The eternal question is \u201cWhy?\u201d Shakespeare wrote that \u201ccomparisons are odorous\u201d (Much Ado About Nothing<\/em>, Act 3, Scene 5), but Stanford psychologist Festinger surmised that the need to compare oneself with others is critically important in the development of the self-concept and self-identity, for we learn by looking at ourselves in relation to others. It is clear that the emerging specialty field of behavioral forensics, drawing on insights from behavioral sciences such as psychology, sociology, and anthropology, can shed much light on why fraud perpetrators act in the way they do.<\/p>\n \u00a9 2016 Join us for more insights into behavioral forensics (behind fraud and similar white collar crimes) from the authors of <\/span><\/em>A.B.C.s of Behavioral Forensics<\/span><\/span><\/a> (Wiley, 2013): Sri Ramamoorti, Ph. D., Daven Morrison, M.D., and Joe Koletar, D.P.A., along with Vic Hartman, J.D. These distinguished experts come from the disciplines of psychology, medicine, accounting, law, and law enforcement to explain and prevent fraud. Because we are inspired to bring to light and address the fraud problems in today\u2019s headlines, we encourage our readers to come back and revisit us regularly at BringingFreudtoFraud.com.<\/span><\/em><\/p>\n","protected":false},"excerpt":{"rendered":" WHERE HAVE ALL THE NEIGHBORS GONE? KEEPING UP WITH THE CEO JONESES (By Joseph W. Koletar) When someone hits the lottery by blind luck, peace and happiness spread throughout the land, right? Perhaps not. Perhaps all that happens is that the fires of jealousy get fueled. The Wall Street Journal of February 17, 2016 (page … Continue reading WHERE HAVE ALL THE NEIGHBORS GONE? – KEEPING UP WITH THE CEO JONESES<\/span>
\nJoseph W. Koletar<\/p>\n