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CEO Verifications and Hiring: Don’t Let Your Board Be Held Liable….or Embarrassed

By Christine M. Cunneen, CEO
Hire Image LLC

July 5, 2012

With the recent scandal in the news involving Yahoo CEO Scott Thompson’s incorrect academic degree, the issue of board liability comes to mind. Is the Yahoo board responsible for the alleged ‘falsified resume’ of Mr. Thompson? Who is to blame? What could the board have done to prevent this from happening in the first place?

To recap: Mr. Thompson claimed to have received a degree in accounting and computer science from Stonehill College. This should have been the first ‘red flag’ because the college didn’t offer a computer science program at the time. Because Yahoo is a publicly held company, activist investors and shareholders were then demanding an investigation of wrongdoing and possible mismanagement by the board over this issue, and wanted the board to accept responsibility for this ‘debacle.’

In fact, this is exactly the type of ‘battle’ that some investors may seek. Shaking up a board and distracting it from its operational focus can be just what an investor needs to win board seats in a proxy fight or bring forced change in management by devaluing the stock price.

If a proper background screening had been conducted, this whole situation could’ve been avoided. A ‘proper’ background screening should cost a mere pittance compared to the costly legal bills Yahoo is facing, not to mention the PR damage now done to its reputation and credibility, or the blow to its stock price affecting shareholders.

A screening isn’t something that can be as simple as a Google search of the party in question. It should include further steps such as verifying employment and academic credentials, as well as a criminal check at multiple court levels. This type of screening should be left into the capable hands of a third party, background screening professional.

What should a board do to protect itself from liability and embarrassment when a CEO’s (or anyone’s) qualifications are brought into question? Here are four things you should keep in mind:

1.  Conduct background checks on all applicants. It should be a matter of course or policy for all boards of directors – whether for nonprofit, academic, institutional, or for-profit organizations – to conduct such screenings of all applicants for any level job position.

2.  Perform education and employment verifications. A simple call to Stonehill College to verify Mr. Thompson’s academic credentials would have revealed an error in his resume (intentional or not), before he became CEO. Not after the fact, when shareholder and legal issues arise and have to be dealt with.

3.  Review screening reports at board meetings. Don’t take management’s word for it. Boards should verify that proper background screenings are being conducted. It’s the directors that will be held liable or accountable for misconduct or that will have to answer to alleged ethical breaches – not your organization’s staff. Be sure that you have reviewed the reports with your own eyes.

4.  Use a professional background screening agency. Working with a professional agency will help your organization to be in compliance with Equal Employment Opportunity Commission guidelines, Fair Credit Reporting Act regulations, and other rules that can help limit your liability exposure.

At Hire Image, we work with employment attorneys and law enforcement officials on a regular basis, and our screenings include not only the ‘usual’ database searches, but access to other sources, including ‘in the field’ investigative services. We are a nationwide company, and this is all we do.

An ounce of prevention can go a long way in avoiding trouble at your organization and costly lawsuits. Don’t skimp when it comes to background screenings – and don’t assume that they aren’t needed at the C-suite level. It could be the most costly mistake you could make.

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