The Integrity News
Vol. XII No. 9
March 10, 2003
"objective risk management services"
Posted: March 10, 2003
Editor's Note: We are revisiting this article
from The New York Times of August 19, 2002,
in light of the requirements of the Sarbanes-
Oxley Act that addresses corporate
responsibility and accountability and which
was the topic of an Integrity News in February.
Corporations are "vetting candidates for
top positions as never before." "There is
far more interest, post-Enron and post-all
the other corporate scandals, in checking
people out." "Companies are specifying
to their executive search firms exactly the
depth they expect each background check
"Until recently, it was considered bad form
to ask a prospective senior executive to
agree to a background check, a request that
requires the signed consent of the candidate."
Editor's Comment: Of course, ALL background
checking must be done in accordance with the FCRA.
"But now, nothing is off limits." "Executives
who specialize in fraud can be very good at it."
"What is driving companies now is the fear of
Companies, at the very least, need to exercise prudence
when hiring executives. It is important to verify the
candidate's ID, check for a criminal or civil litigation record,
check their Driver's License record, and verify their past
employment, education, and professional registrations.
While some companies do not even pay attention to the
news media to see if an executive candidate has been
involved in a scandal, many are now starting to at least
do the minimum as described above.
The New York Times article actually emphasizes the very
in-depth background checks that are now becoming common.
"Investigators conduct fact-to-face interviews with former
colleagues, business partners, spouses, secretaries,
estranged children, apartment doormen, and even members
of the clergy." "They especially value access, sometimes
provided by former business associates or colleagues, to
the hard drive on a computer the executive once used."
The investigators are looking for "a listing as an un-indicted
co-conspirator in a fraud case, personal bankruptcies,
evidence of gambling or drinking problems, disparities in an
executive's lifestyle and salary, or any sexual harassment
complaints even if un-filed and un-prosecuted."
The article goes on to point out that these in-depth background
checks are expensive -- in the $20,000 - $50,000 range each.
But, it goes on, "when you consider that these people will be
doing deals in the millions of dollars, it's a small price to pay."
Exercising basic prudence for your executive level is actually
no more expensive than very thorough normal background
checking. Usually, the biggest hurdle is changing your company
culture to accept the fact that you now have to check people
at levels that used to be checked "by talking to a couple of
folks at their golf club".
As the economy rebounds, companies will want to add key
people in order to grow. If you would like to discuss an
important up-coming hire, just call us at: