Research finds that CEOs and other C-suite executives often slip around companies' background screening policies when they are the very people most in need of comprehensive vetting.
Slightly over one-third of HR leaders surveyed by background screening firm HireRight said that recent college graduates undergo more background screening than the CEO, and just one-third said that they always verify the background of new executives.
Respondents said they skipped checks because they were rushed to fill critical senior roles; they didn't believe that executives would lie about their experience; and they had referrals from other executives. Some senior leaders who are promoted to a C-suite position may also go many years without a rescreening due to long tenure at an organization.
"We often see pushback from C-suite candidates," said Christine Cunneen, CEO of Providence, R.I.-based background-check company Hire Image. "Frequently executives move from company to company through the 'old boys' network' and are recommended personally by a company's current management. For many in HR, it's difficult to require an executive to complete the information necessary for a background check. But as we have seen over the years, it's absolutely necessary."
That's because the stakes tend to be far higher than for the typical frontline employee. The company makes a significant financial investment that a company when it hires a new executive. The person holds an enormous amount of responsibility and influence, not to mention the liability he or she carries in the forms of potential conflicts of interest, negative media coverage, and past or current litigation.
"Companies expect to trust executives with protecting assets and financials, and a wrong decision in hiring an executive can have an immensely harmful impact on the company brand," said Marco Piovesan, the CEO of InfoMart, an Atlanta-based background screening firm.
Executives are the face of the company, Cunneen said. "If an executive exaggerates or fakes his or her background, these are the people who become the news headlines which bring negative publicity to the company and devalues the company stock."
Damage to brand reputation is one of the top business risks, said Chris LeClair, senior vice president and general manager at First Advantage, a global background screening provider headquartered in Atlanta. The bad behavior most harmful to a company's reputation is public exposure to criminal or scandalous acts, he added. "An executive indiscretion disclosed publicly can have a large negative influence on the bottom line and on attracting and retaining talent. In the last two years, 81 percent of the Fortune 100 had adverse media exposure related to extortion, embezzlement, harassment or scandal."
A couple of recent examples from executive screens conducted by First Advantage found that:
- A company's new chief financial officer had previously been arrested in a check fraud scheme.
- A candidate for company president claimed a false college degree, had filed for personal bankruptcy and had two lawsuits pending against her and her former employer.
[SHRM resource page: Background Checks]
Executives tend to have unique professional histories deserving of a more thorough background check than the typical worker.
"An executive's background vetting is more comprehensive, covering a wider range of services with a global reach that may not be conducted for other employees," Piovesan said. "Alongside the usual basic screening due diligence—such as criminal record checks, motor vehicle records, sexual offender databases, sanctions searches, education verification, previous employment verification and drug screening—executive screening should include additional vetting of professional licenses, social media searches, credit reports, extensive reputational searches, and company ownership and directorships positions globally."
Cunneen said that education verifications and criminal records checks "are obvious, given recent headlines," and recommends adding civil searches to check any history of lawsuits, credit reports for those with fiduciary responsibility, and social media, news and publication searches to gauge public image.
Experts also recommend searches for:
- Any litigation involving the candidate at the state and federal level.
- Affiliations, board memberships or corporate ties that may pose conflicts of interest.
- Corporate financial records on past businesses the candidate owned or managed.
- A global address history because executives often have work experience that has taken them around the world.
Piovesan noted that it's not just the level of screening that must be enhanced for executives but also the concierge-type level of candidate support. "Executives are often personally walked through the process of scheduling a drug test or providing required information," he said.
Compliance Is the Same
Experts said that standard employment screening compliance practices remain the same no matter where candidates fall in the organizational chart.
"The same Fair Credit Reporting Act [FCRA] and state laws apply, however, the seven-year limit on negative or adverse information no longer applies for those making $75,000 or more per year, under the federal FCRA," Cunneen said. "Therefore, arrest records, dismissed criminal cases, civil records, and other adverse information may be reported further back than seven years for those executives."
Piovesan said that all the standard consent rules apply when screening executives, but it needs to be made clear to those executives that the screening may be "very comprehensive" in terms of extensive due diligence.
Experts also agreed that periodic rescreening is a best practice for all employee levels.
"Periods of long tenure exposes the company to risk," said LeClair, who recommends rescreening at milestone promotions, such as becoming a vice president.
"It's a sensitive area at this level, but annual criminal searches and driving record searches are recommended, along with continued monitoring of social media profiles," Cunneen said.
Executive rescreens could also include annual reviews of credit reports, professional license renewals and negative media reviews.
"Headlines and negative publicity have proven time and time again that executives can and do make poor decisions," Cunneen said. "It would be better for the company to discover these issues themselves, and either head them off or remediate the issues before they become even more serious and costly."