Research has shown CEO recruits who have had even one minor legal infraction, such as a speeding ticket, are seven times more likely to engineer an accounting fraud than those with completely clean records.

The startling revelation came from a report titled “Executives’ ‘Off-The-Job’ Behaviour, Corporate Culture, and Financial Reporting Risk”, compiled from the collaboration of three US business schools.

The paper also says said CEOs with a taste for the high life - as measured by ownership of a yacht, a high-end car, or a costly home - are 10 times more likely to preside over firms where other executives engineer frauds, suggesting material distractions may hinder the watchfulness of some.

The study compared firms involved in fraud during the 1992-2006 period; with firms matched for size, CEO age and other factors. The size of the sample was small, only 109 firms involved in fraud and 109 which were not. Lead Author Professor Robert Davidson said it included “every case of fraud from an S&P 1500 firm” during the period.

“In our fraud sample 21% of CEOs had broken the law, and in the non fraud sample it’s 5%,” Prof Davidson explained, “with regards to more serious crimes, there was not a single CEO in the no-fraud sample who had committed a crime other than a traffic violation. We had 12 in the fraud sample.”

A common phrase in CEO recruitment has reportedly been; “don’t sweat the small stuff.” Professor Davison says the lesson of this research is; “there’s information in the small stuff, it matters.” 

The full report is available online.