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Nov 03, 2012

Why employee background checks still matter

Checks should be used to prevent surprises that can hurt the bottom line.

As reputational risk becomes a bigger concern for companies, an adjustment in hiring policies to include a more thorough series of background checks may be in order. While many companies already do background checks on key employees, there may be some additional measures they can take to ensure they are shielded from persons giving false credentials or concealing potential conflicts of interest.

Randy Shain, executive vice president of First Advantage and founder of BackTrack Reports, says background checks should be viewed more as a way to prevent losses at companies. They should not just confirm biographical information, but also show where else biographical assertions have been made and find out whether they are accurate.

Shain says the most thorough background checks will search for anything in the public record about a candidate and then see if the information has remained consistent over time. Information about a candidate mentioned in newspaper wedding announcements, press releases to PR Newswire or past bios that were handed to previous employers should all be scrutinized.

‘For a C-suite executive, a board member or any kind of high-level employee, it’s well worth a few thousand dollars to really do all of the in-depth searches needed to make sure everything is on the up and up,’ says Shain.

Shain estimates that comprehensive background checks could cost between $4,000 and $5,000.

Obviously, this is an upfront expense many companies would prefer to avoid – but companies that don’t do adequate checks can suffer serious reputational damage and financial loss if directors and officers are found to be deceitful.

In May this year, for example, it was discovered that former Yahoo! CEO Scott Thompson had embellished his credentials by falsely claiming to have a computer science degree. ‘You can’t tell me they didn’t spend millions of dollars in public relations experts and legal fees, board members’ time, and stock price problems,’ Shain says.

Companies can also suffer a lowering of morale and a breakdown in ethical culture. ‘It is very hard for employees to follow a leader who is not extremely ethical – ethics count,’ says Shain. Employees generally react negatively when their bosses act in unethical ways; there is sadness, confusion and disheartenment, and good, honest employees may head for the door. The tone at the top really does matter.

‘You need to set an example for your employees that you are going to do the right thing if you are going to expect them to do the right thing,’ notes Shain.

Additionally, it may be important to carry out the public records checks to make sure you haven’t missed something – just like Yahoo! did. ‘You are just doing it to prevent your enemies from getting hold of the information and causing you harm,’ Shain explains. In other words, you have to look for the information so that if anything is found, you can manage it and take steps to prevent it from having a devastating effect on the company bottom line. What you don’t want is to be surprised by something that is easily preventable, and conducting thorough background checks can assist in that process.

‘Searches should be done to ensure that you do know that what people are saying about themselves is indeed true – that is ultimately the way to prevent these types of problems from occurring,’ Shain concludes.
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