When Scott Thompson was named president of PayPal in 2008, the former Visa executive seemingly had a bright future ahead of him.

Global media and technology company Yahoo! certainly believed that to be the case. Yahoo! hired Thompson as its Chief Executive Officer in January 2012. 

Just five months later, he was no longer with the company as it was revealed that he falsely claimed to have a bachelor’s degree in computer science (his degree was actually in accounting).

In some situations, the misrepresentation of a degree might not lead to the CEO’s removal. However, while working for one of the largest tech companies in the world, and you lie about a computer science degree, it’s something that is difficult to sweep under the rug.

The degree discrepancy was brought to light by an investor, who issued a press release questioning whether the Yahoo! board of directors had "failed to exercise appropriate diligence and oversight in one of its most fundamental tasks – identifying and hiring the Chief Executive Officer.” 

Ouch.

It’s not known which types of background investigations Yahoo! may have performed before Thompson was hired.

This serves as a cautionary reminder for all employers to do their background screening due diligence when it comes to hiring senior executives; particularly those in public-facing roles.

The Bigger the Role, the Bigger the Risks

It seems obvious that you would want to subject C-level executives to more exacting background checks.

Yet, too often, we see companies do the same basic investigations on all of their applicants – from entry level staff to their top executives.

While it’s certainly better to do a basic background check than none at all, the stakes are clearly higher for executives since the risks of making a bad hire can have serious repercussions on the business; particularly when information that should have been flagged is missed.

Consequences can range from a decline in employee morale and the tarnishing of a company’s brand, to falling stock prices and damaged partnerships.

Our experiences at Commercial Investigations are backed up by surveys on this subject. A firm in the UK found that two-thirds of businesses do not consistently verify the backgrounds of new members of their C-suite. 

Even more alarming was the fact that 37% of the senior HR executives surveyed in the study admitted that their chief executives go through fewer interviews and tests than the college graduates that they hire!

It gets worse. Senior level executives are often the worst offenders when it comes to embellishing their resumes. A 2021 survey from ResumeBuilder.com found that 46% of those earning over $150,000 admitted to enhancing their resumes, compared to only 25% of those earning $99,999 or less.

How to Avoid a Bad Executive Hire

Given the stakes involved in an executive hire and the available data on the risks inherent in the process, it begs the question … how do well-run companies consistently make these mistakes?

One of the primary reasons is that the executive candidates tend to be well-known commodities within their industries. Since relationships may already exist between executives at the hiring company and the candidate, these connections provide companies with a comfort level in the candidate’s skills and accomplishments. 

Read more on how to Spot Lies in the Hiring Process.

It’s also natural to assume that a candidate could not rise to the level they have reached in another organization if they weren’t the individual they portray themselves to be.

These are all logical assumptions, but as we have seen far too many times, it’s simply not reality. That is why companies have an obligation to go beyond the basic background screening when hiring a senior executive and include areas such as:

·    Conducting a thorough investigation into all aspects of their resume.

·    Reviewing their LinkedIn content and other social media profiles.

·    Ensuring alignment between their submitted resume and other resumes/experiences that may exist online.

·    Confirming other elements of their public life, such as board memberships or volunteer work.

·    Validating licenses and accreditations.

·    Running a credit report.

Depending on the individual, the role, and any initial findings, a search could easily expand beyond these parameters. 

It’s also best practice to conduct annual re-screens of your executive team to ensure there are no issues that have recently arisen which could negatively reflect on the individual and, by extension, the company.

If all this sounds like this would be a lot more money than a standard background check, you’re correct. Then again, consider the consequences. 

Having the peace of mind to know that a person is who they claim to be is something you can’t put a price on. Just ask Yahoo!