In the E&C Pulse newsletter on Thursday, February 7th, the topic was what organizations need to do to be ready for skeletons in the closets of their top executives, board members or celebrity product endorsers.
As situations such as the scandal in Virginia involving the governor, lieutenant governor and attorney general grab headlines, companies are huddling up to figure out what they need to do, and whether they need to conduct checks again to make sure nothing is lurking that could cause embarrassment or take a financial toll on the business.
This all brings questions--who to check, what to check for, how far back to check, which sources to use?--as well as legal issues and ethical considerations.
Most companies find it legally problematic to retroactively conduct background checks unless specifically allowed for in an employment contract or employee handbook, but many have workarounds, such as requiring background checks prior to promotions or change of title, said Don Aviv, president of Interfor International, which conducts due diligence and investigative checks for corporations.
Most companies don’t conduct social media checks unless specifically outlined pre-hire and allowed for by law, and many states limit the types of information accessible for standard pre-hire background checks, he said. For example, credit history, certain levels of criminal history, past medical/mental history, and past drug usage might be considered off-limits in some jurisdictions.
“I think this is extremely problematic, as someone who has been investigating fraud for a long time,” said Aviv. “Statistically speaking, someone is more likely to commit a crime if they have done so in the past. Why as a society are we turning a blind eye to this reality?”
To do retroactive background checks on already employed personnel would be a huge undertaking, and is not realistic for everyone, though companies should strongly consider it for their senior and executive leadership teams, said Meredith Eaton, director of North America for corporate communications firm Red Lorry Yellow Lorry.
“Best-case scenario, there’s nothing to worry about. Worst-case scenario, there’s a skeleton lurking that remains unknown,” she said. “Only by knowing about it, can companies deal with it and preempt major, public consequences. The unknown is more trouble than it’s worth, especially when--not if--it gets exposed.”
While it’s much tougher to consider this type of review after an executive, board member or spokesperson has been hired, people willing to serve in these roles must understand they are subject to certain expectations, even post-employment, said Nick Kalm, chief executive of Reputation Partners, a crisis management firm.
”You give up some rights to privacy when you accept such a role,” he said.
Slippery slope ahead?
Beyond the practical and legal considerations that organizations need to consider, there are questions associated with judging past behavior on current societal rules? Is this a slippery slope with unintended consequences?
“It is a subjective and slippery slope,” said Shannon Wilkinson, chief executive of Reputation Communications, a reputation management company. And that means CEOs, C-suite executives and VIPS must be prepared for a range of allegations and crises, as they often are the subject of articles, internet conversations, commentary and speculation on topics ranging from their appearance and behavior to leaked company documents.
Wilkinson recently helped to prepare a comprehensive crisis management plan for an iconic business figure. It identified five potential scenarios with an action plan for addressing each one, including what type of public statement would be made if needed, and by whom.
“The client recognized the need to be prepared in such an event,” she said. “To date the plan has never needed to be activated. Everyone in a public or leadership position needs such a plan.”
A true due diligence investigation is more of an art than a science, said Aviv, and that means experienced, skilled investigators should be reviewing a person’s background, not an automated system.
“This industry has become too commoditized and automated to be truly effective. It’s all about speed and money, whereas it should be about attention to detail and thoroughness,” he said.
While most background verification companies attempt to check and verify information proactively provided by a candidate, such as a resume, Aviv said they should employ the opposite approach--assessing and analyzing what is missing or doesn’t fit based upon what is identified in a person’s background.
But that type of investigation “takes time, effort and is much more costly,” he said. “However, in the long run, the cost of litigation stemming from a bad hire will certainly outweigh the cost of a proper due diligence investigation.”