Why do leaders risk so much over what, in the grand scheme of things, is a small dishonesty?
FORTUNE — In the wake of Yahoo CEO Scott Thompson’s departure amid controversy over his padded resume, the question remains: why did he do it?
Whether Thompson embellished his bio with a college major he didn’t earn, or simply signed his name to a document that someone else falsified, the lie cost him a flourishing career. It also added him to an ignominious list of powerful leaders who stepped down in disgrace over resume deceptions, including former RadioShack RSH CEO Dave Edmondson and Notre Dame head football coach George O’Leary.
Why do they do it? Why do they risk so much over what, in the grand scheme of things, is a small dishonesty?
Thompson didn’t devise a multi-billion dollar Ponzi scheme or embezzle millions in company funds. At some point in the last few years, his actual accounting degree from Stonehill College on his bio changed into a degree in both accounting and computer science — a false credential that appeared periodically in his online bio when he was PayPal president. After he joined Yahoo yhoo in January, his official bio containing the double major became part of the company’s annual report filed to the SEC, a document that CEOs must personally attest is truthful.
“Whether he was the fabricator or complicit in the perpetuation of the falsehood, he didn’t have the courage to correct it,” says Adam Hanft, a consumer culture expert and branding strategist based in New York.
People lie when the truth is too painful, embarrassing, or simply perceived as inadequate. “Clearly he didn’t go to a first-tier school, so I would suggest that he was operating under some feeling of insecurity or inadequacy,” Hanft says. “Here’s somebody who achieved despite that, but — as people do — harbors some anxiety and the fear of being found out.”
While Thompson might appear to the outside world to embody success — a rising star in corporate America whom Yahoo wooed from PayPal to turn around the struggling Internet giant — his own self-perception could be wildly different.
“Lying results from a deep-seated belief: I am horrible on the inside. I need to make up a bright, shiny self to show the world. If anyone ever finds out who I truly am, everything will come crashing down,” says New York-based psychoanalyst Elizabeth Singer. “Look how fudging his academic record has brought about the shame he sought to avoid.”
In this competitive job market and economy, credential embellishing is far from rare. In fact, employers are seeing an increase in the number of outright lies on resumes, such as changing employment dates to hide an employment gap or listing enhanced responsibilities, according to Michael Crom, vice president at Dale Carnegie Training.
“With the higher levels of unemployment and the increased competition to get a few jobs, people begin to exaggerate and outright lie on their resumes,” says Crom. Half of all resumes contain at least one inaccuracy, whether deliberate or inadvertent, according to several studies.
A degree from a small Catholic college outside Boston doesn’t quite have the same shimmer as the Harvard and Stanford diplomas littering Silicon Valley offices, so Thompson might have felt he needed the edge of a technology degree. “Today’s business world is so competitive. If you don’t have the right MBA, didn’t go to the right school, don’t have the right educational background, people look down on you,” says Richard S. Bernstein, an adviser to Donald Trump and the Trump Organization.
Once you tell a lie, and leave it uncorrected long enough, you can start to believe it’s true. “People start saying something enough that they start believing it themselves,” says David Reiss, a psychiatrist based in San Diego.
“Looking back on the history of these people, the pattern started before they were powerful. They got into the habit of inflating things out of lack of confidence,” Reiss says. “Once they got to a higher level, if they’ve gotten away with it, they think they’ll never get caught.”
Once executives reach the top levels of management, they can become surrounded by sycophants, start believing their own accolades, and lose sight of the truth. “You have to be able to hold people accountable. What happens with leaders is there’s nobody who is speaking truth to power,” says David Gebler, president of Skout Group in Boston, which helps organizations manage people and culture based risks. “They’ve got themselves locked into a world where they really believe they’re not doing anything wrong.”
We all have the tendency to rationalize behavior that falls in an ethical or moral grey area, and many of us stretch that line to cover outright lies. We’re wired to adjust the narrative of our actions to align with our identity. If we believe we’re fundamentally honest people, we will rationalize our behavior to ourselves as ethical — regardless of how it looks to an impartial observer.
“The brain is doing this constant dance of, ‘How do I get more of what I want while holding onto the identity that I think I actually have,’ ” says Kevin Fleming, owner of Grey Matters Intl., a neuroscience-based executive development and coaching firm based in Jackson Hole, Wyo. and Tulsa, Okla. “The brain is always wired to reduce dissonance.”
Indeed, one of the dangers of a prominent individual being publicly shamed, as Thompson has been, is that the general public grows more likely to rationalize their own shady behavior. “They make us feel good because it puts our own behavior in perspective,” Hanft says. “It’s why we love celebrity meltdowns or professional meltdowns. They allow us to continue in our delusion of acceptable behavior.”
However, the little lies can lead to big missteps. They pave the way for us to rationalize larger dishonesty. So whatever we take away from the Thompson episode, we should resist schadenfreude — it could actually lead us to greater deception in our own lives.
A spokesperson from Yahoo did not immediately respond to a request for comment.