Crime doesn't pay. Well, for some. Contrary to claims that managers lie, cheat, cook the books and get away with it, a new study shows that individual perpetrators suffer huge consequences. Not all, but a lot of them.

The study, The Consequences to Managers for Financial Misrepresentation, tracked the fortunes of all 2206 individuals identified as responsible parties for all 788 Securities and Exchange Commission and US Department of Justice enforcement actions for financial misrepresentation from 1978 through to September 30, 2006.

The researchers, Jonathan M. Karpoff from University of Washington, D. Scott Lee and Gerald S. Martin, both from Texas A&M University, found that 93.4 per cent had lost their jobs during the violation or enforcement periods, and most of them were fired. About a third (31 per cent) were barred from working as an officer or director and received fines that averaged $5.7 million. The researchers also revealed that 21 per cent had pleaded guilty or had been convicted and had been sentenced to an average 4.3 years jail and 3 years probation. All up, there was a total of 1003.6 years of prison imposed on perpetrators.

Interestingly, not all of them suffered. Among the culpable chief executive officers who were not terminated, a higher fraction (76 per cent) held the position of board chair than for CEOs who lost their jobs (69 per cent). This is reversed for non-culpable CEOs who also chaired the board (15 per cent versus 9 per cent among non-terminated executives).

All of which suggests that strong CEOs are more likely to hold on their jobs. Or cower the board into submission. Also, culpable managers are more likely to keep their jobs when the SEC drops charges.