The most common type of background checks run on executive hires are routine pre-employment type background checks. These searches are usually performed through one or more multi-jurisdictional databases containing vast collections of accumulated data. Characteristically, these checks are limited to a 5-component review of: education verification, social security validation, employment verifications, criminal records, address verification, and sometimes credit history. These types of background checks are the same as those performed on any level of employee. Such a limited background is not suitable at the executive level as many serious issues will be missed completely.
“Statewide” and “nationwide” criminal searches, typically done in routine background checks, usually miss up to 75% of all criminal convictions. Many people think that there is a database containing all information about a person’s background. This is not true. Additionally, records still need to be retrieved in person to assure the correct information is reported about that specific person, rather than someone else with the same name. Since criminal records do not usually contain a person’s social security number, they must be searched using date of birth.
Standard background checks are often inexpensive to conduct and quick to turn around. But relying solely on them is especially dangerous when hiring corporate executives.
There are many issues with routine background checks; including: widely varying quality and availability of information, bad search criteria resulting in no results found when there is information, and results being returned on persons with the same or similar name being mistaken for the searched candidate. The standalone use of national databases for background checks may, also, not be in compliance with the U.S. Fair Credit Reporting Act and state laws too.
Standard background checks deliver incomplete “snapshots” of an individual’s information in the public records domain. By contrast, executive due diligence backgrounds examines over 30 different components of public record data, a deep internet search, and in-depth reviews of news sources and media.
Some of the components looked at in executive due diligence are: federal criminal history, financial and legal issues, reputation, misrepresented education, different identities covering up other serious issues, behavioral history, civil litigation matters, conflicts of interest, and adverse or undisclosed matters.
This is not to say routine background checks are not important. But what it does mean is they are not sufficient in uncovering all the critical information to protect a company and its board from fiduciary exposure and possible shareholder law suits if adverse information comes to light after hiring, or after an M&A deal has closed.
High quality executive background checks can reveal vital information, undisclosed in a routine standard background check. Things that could be uncovered included: signs of malfeasance, misconduct (with or without criminal conviction), litigious behavior, media and/or social media negatives, IP theft, interstate bankruptcy, hidden aliases hidden business and board level involvement, undisclosed business ownership, significant numbers of name changes, manslaughter, murder, signs of misconduct, bribery, racketeering, con-artistry, financial pressures, money-laundering, and other negative matters.
Good executive background checks also include reference interviews. In the hands of a highly trained interviewer, they can reveal persistent character and behavior patterns indicative of various issues including corruption.