When Alan Greenspan addressed the Harvard University class of 1999, he shared a message of wealth and prosperity that was reflected in many aspects of American life. “You are being bequeathed the tools for achieving a material existence that neither my generation nor any that preceded it could have even remotely imagined as we began our life’s work,” he told the new graduates. The stock market had more than doubled in the previous five years, and the unemployment rate was at a 30-year low. The United States, Greenspan reminded graduates, was enjoying, “the greatest prosperity the world has ever experienced.”
CEOs Who Began Their Careers During Booms Tend to Be Less Ethical
Entering adulthood in a boom or a bust also can have implications for people’s behavior at work, even decades later. For example, CEOs who begin their careers in prosperous times tend to use riskier financial strategies than CEOs who first enter the workforce in recessions. But are they also less ethical? Yes, at least when you analyze their stock backdating behavior, a common yet almost always illegal practice throughout the 1990s and 2000s. Even after adjusting for firm size, industry, number of options granted and other factors, CEOs who graduated in the best economic times were approximately 30% more likely to falsify the dates of their stock option grants than CEOs who graduated in the worst economic times. Quite simply, CEOs who began in their careers in a boom were more likely to cheat.