DEFINITION of 'Infectious Greed'

A phrase used in his July 2002 testimony before the Committee on Banking, Housing and Urban Affairs by former Federal Reserve Board chairman Alan Greenspan to describe the breakdown of corporate governance checks and balances. Mr. Greenspan spoke of this while focusing on reforms of corporate governance to help protect investors.


BREAKING DOWN 'Infectious Greed'

Infectious greed, as Mr. Greenspan put it in this testimony, "[gripped] most of [the] business community. Our historical guardians of financial information were overwhelmed. Too many corporate executives sought ways to 'harvest' some of those stock market gains. As a result, the highly desirable spread of shareholding and options among business managers perversely created incentives to artificially inflate reported earnings in order to keep stock prices high and rising."

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