**3. Why do leaders make fraud?**

In addition to financial losses, leaders certainly lose their leadership positions, control of their business, and especially their reputation [6].

How did they commit the frauds they were accused of while the company was open with a board of directors made up of influential people? Why did they go

down that path, risking everything they had worked for? In general, a manager or entrepreneur will engage in fraud if the organizational context is favorable to commit fraud and also if the manager displays a profile likely to commit the act of fraud.

## **3.1 Fraud following the favorable organizational context**

The opportunity to commit fraud arises when controls are absent or even failing. Thus, fraud will be easier to carry out since the manager will be free and without control within the company. Indeed, senior managers who can circumvent existing controls, especially if the external governance mechanisms such as regulations, or internal ones such as the board of directors, are insufficient or even ineffective [7]. When they commit fraud, the managers of a company know very well the administrative machinery and have access to data and systems, and when the latter are involved and part of the shareholders, this will make them in a position of strength, while reducing the role of the board of directors to which they belong. Managers can therefore exercise absolute control over the company. It can therefore be said that there was no counterweight to their authority within the company. For example, the CEO can be a more or less significant shareholder, which gave him an edge over the other members of the board of directors.

Another opportunity that favors fraud is the pressure geared toward high performance; this generally manifests itself during stock market bubbles. In fact, rapid deflations of stock market bubbles are very often accompanied by the manifestation of fraud committed by business managers [8]. Indeed, the stock quotes of several companies always reflect expectations of optimistic profits, which implies very high growth rates. Any profit announcement that does not meet stock market expectations will result in a sharp drop in the stock price. In this context, if the performance of the company begins to decline, the management of the company will be forced to manipulate the accounting results to ensure that the earnings per share announced meet or even exceed market expectations. Investors then imposed a stock market valuation, at an increasing, unrealistic rate, which pushes managers to fraud, by favoring accounting manipulations. Also, the stock market bubble will be liable to lead to fraud or manipulation of the financial statements if the directors have a remuneration strongly focused on the appreciation of the stock market price or focused on results or profits.

**The governance role:** the board of directors was composed of the different members—the founders, the directors of other partners, and the audit committee of the company.

**Independent directors:** board members must have experience and expertise in the areas of business of the company. They must ensure the control of management systems and the various strategic operations. It can therefore be argued that most of the information at their disposal concerning the company came from its management. The lack of expertise on the part of the board led to failure to perceive the warning signs of manipulation or embezzlement.

#### **3.2 Is the fraudulent manager a psychopath?**

In addition to the organizational context, the manager's psychological profile can lead him to commit fraud. Indeed, some research on criminological thinking on financial fraudsters have agreed that there are psychological peculiarities specific to financial fraudsters, which are very similar to the peculiarities of the psychopath [9]. In fact, like all psychopaths, specialized fraudsters always give the image of a healthy, rational, and apparently normal personality, which would mask their true nature.

In order to recognize the psychopathic fraud leader, three aspects of the leader's profile are typical: always having a rationalizing speech in order to justify their actions, and an arrogant attitude.
