Time for a checkup
It wasn't quite a case of "I liked the gun so much I bought the company," but Smith & Wesson was still plenty embarrassed in February after discovering its chairman had served time in the 1960s for committing armed robberies with a sawed-off shotgun. The chairman has, as they say, moved on to other opportunities. So have a few other less-than-forthright big shots--the head coach of the Notre Dame football team (who claimed to have a master's degree), the CEO and chairman of Sunbeam Corp. (who failed to disclose that he had been twice fired by other companies), and, most ironically, the CFO of the software manufacturer Veritas, whose company name means truth in Latin (he fabricated an M.B.A.).
Imaginative resumes, of course, aren't a product of the modern era. Presumably, they've been around since the dawn of management. What's new is their power to wreak havoc at the executive level. Consider Veritas, whose stock price plummeted 19 percent immediately after its CFO's duplicity was revealed. Now, worried companies arepaying more attention to top-level background checks, in order to avoid potential disaster. "The events of the last several years have clearly swung the pendulum to place a premium on minimizing the risk in the hiring process at the senior level," says Bob Damon, North American region president for executive recruiter Korn/Ferry International.
Pressure. But the motto of the old boys' network--"trust me on this one" --still holds sway in countless corner offices. When CEO s are hired, their buddies in high places may wave off any pesky red tape, says Peter Turecek, managing director of risk consultant Kroll. "Sometimes, there's pressure on HR to not do the full and complete background check you'd do for a VP hire further down the pecking order."
In some cases, applicants get a free pass for other reasons. Maybe people assume they've already been vetted, or the job hopefuls dazzle with their charm. "They develop their own legend about themselves, and they start to believe their propaganda," says Les Rosen, president of Employment Screening Resources. "They tell the story over and over again, and nobody bothers to check."
Apparently, there are plenty of fibbers out there: In 2001, the executive search firm Christian & Timbers reported almost a quarter of 7,000 executive-level resumes were inaccurate, with most exaggerating easy-to-check details like years on the job and college degrees. But at companies wanting to investigate applicants for top-level jobs, managers still must make tough decisions about how much to pay. "Do you do a quick and dirty background check, or do you want to get involved in in-depth research?" asks Dean Suposs, general manager at ADP Screening & Selection Services. Checks of public records, such as criminal and credit databases, run as little as $15 and can uncover a variety of lies or exaggerations.
Companies can spend $25,000 to $50,000 for the most intensive background checks, which may encompass everything from interviews with yacht club buddies to examinations of property records and divorce papers. "You may find that Joe Smith is a great executive, but he also leaves the office at 3 p.m. every day to go drinking at the bar," Turecek says.
But companies need to be cautious. "Anytime you scrutinize one person more than another without reason, you open the door to some claim that you're treating that person differently because of a protected trait," warns employment law attorney Rod Fleigel of San Francisco.
Is all the hassle and expense of a background check worth it? Think about the relief of employers who got the goods on these applicants vetted by HireRight, a California employment screening firm: the man who said he worked in an Arizona prison and turned out to have been an inmate; the woman who tried to confirm she went to college by faxing over a "batchelor degree," and the man who used the name and Social Security number of a dead guy. "The greater the risk to the company, the more you really need to invest in verifying facts," advises J. H. Verkerke, a professor of law at the University of Virginia who studies employment issues. "That's time well spent."
This story appears in the July 19, 2004 print edition of U.S. News & World Report.
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