After Yahoo: Why do powerful people lie?

Why do leaders risk so much over what, in the grand scheme of things, is a small dishonesty?

This article was originally published by on Wednesday, May 16, 2012.

By Katherine Reynolds Lewis, contributor

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.

At the risk of psychoanalyzing someone through the media, Hanft and other experts in leadership and human behavior offer four broad categories of explanation for this kind of deception.

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."
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