The C‐Suite and Fraud

AuthorJ. Ralph Byington,Jo Ann McGee
DOIhttp://doi.org/10.1002/jcaf.22272
Published date01 May 2017
Date01 May 2017
53
© 2017 Wiley Periodicals, Inc.
Published online in Wiley Online Library (wileyonlinelibrary.com).
DOI 10.1002/jcaf.22272
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The C-Suite and Fraud
Jo Ann McGee and J. Ralph Byington
INTRODUCTION
An organization’s
C-suite members have
titles that begin with
chief or the letter C.
They include among
others: chief execu-
tive officer (CEO),
chief financial officer
(CFO), chief infor-
mation officer, chief
risk officer, chief
compliance officer,
and chairman. One
of the responsibilities
of these executives
is to set the tone at
the top, to do the
right thing, and to
establish an atmo-
sphere of trust and
confidence for their
employees, custom-
ers, creditors, and
investors. The majority of
these executives fulfill this
responsibility by displaying
ethical behavior andintegrity.
However, a smallpercentage
of executives do commit fraud,
and this fraud happens with
enough regularity to be a major
concern for organizations
(Darvall-Stevens, 2015).
The primary responsibil-
ity of the C-suite is to engage
in decision-making activities
that will increase shareholder
wealth. The goal of a white-
collar criminal is to obtain
money, power, services, or
property and/or attain a busi-
ness advantage. Specifically,
WCC can represent a signifi-
cant cost to an organization
that results in a decrease in
shareholder wealth. Accord-
ing to the Federal Bureau of
Investigation (FBI),
the cost can include
the destruction of
the organization, the
devastation of family
savings, and loss of
billions for investors
(FBI, 2015). What
happened at Enron
serves as an excel-
lent example of the
white-collar crimi-
nal achieving his
objective with these
very results occur-
ring. The criminals
involved were mem-
bers of the C-suite.
The purpose of this
article is to suggest
possible safeguards
and remedies to
prevent and detect
C-suite fraud in
order to eliminate
the potential cost of WCC
forthe firm.
WHITE-COLLAR CRIME
Before being able to effec-
tively address C-suite WCC
issues, the organization should
have a working knowledge of
WCC. White-collar crime has
been defined in a number of
ways. The term white-collar
Fraud committed by the C-suite is a secret that
is rarely discussed. However, C-suite fraud hap-
pens with enough regularity to be a major concern
for firms (Darvall-Stevens, 2015). The financial
debacles of Enron Corporation, Tyco International,
WorldCom, and Satyam Computer Services, Ltd.
taught us that the C-suite can certainly play
a major role in perpetrating white-collar crime
(WCC). In each of these environments, the C-suite
was either directly or indirectly involved in creat-
ing and or approving fraudulent financial state-
ments as well as committing other types of fraud.
These actions came at great cost to the firms
and those involved with the firms: investors;
creditors; and employees, both current and retired.
Thepurpose of this article is to suggest possible
safeguards and remedies that an organization can
implement to prevent and detect C-suite fraud in
order to eliminate the potential cost of WCC for the
organization. © 2017 Wiley Periodicals, Inc.
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