No Good Surprises: The Importance of Vetting

May 2012

IN THIS ISSUE

— Lies, Damn Lies and Curriculum Vitaes: Why We Verify
— Know Thyself: Investigating Potential Hires as if They Were Adversaries

GREETINGS!

Welcome to the May 2012 edition of our newsletter! In this issue, we’ll examine why vetting of employees should be a crucial part of any hiring process.

LIES, DAMN LIES AND CURRICULUM VITAES: WHY WE VERIFY

Trust is an essential part of any employer-employee relationship, and it has been an overabundance of trust that most often leads to trouble for a company. The recent case of Yahoo!’s Scott Thompson — who lied about receiving a computer science degree as an undergraduate, when in fact, he did not — demonstrates the negative consequences inadequate vetting can have. Not only did Thompson resign after four months in the top spot, but the director who headed the search committee also quit and, perhaps most difficult for Yahoo! management, the activist investor who argued for Thompson’s dismissal because of the resume lie gained three seats on the company’s board.

With such tactics becoming much more common among activist investors — who need only a minority stake to bring proposals to a company’s shareholders for a vote — the best defense for a company’s management or board is a good offense. Solid vetting techniques should not just include calling someone’s listed references, especially for those in management roles, but a thorough dissection of every claimed affiliation, certification or educational degree, as well as interviews with former employees and perhaps even competitors.

KNOW THYSELF: INVESTIGATING POTENTIAL HIRES AS IF THEY WERE ADVERSARIES

Once someone is hired, they’re on the team. Until that time, however, the best practice for any company is to be skeptical of every claim made by a potential hire, until they are fully vetted. It has become routine in our work to find that someone claimed to have a Master’s degree from an institution, when only receiving a Bachelor’s degree, as well as to claim membership in trade organizations (such as an engineering society) in which they have not actually participated. The same holds true for professional licensing — with rare exceptions, for someone in a licensed profession to claim that credential, they must continually renew that license and meet continuing education requirements.

While database research is a key component, interviews are also an important part of the vetting process. Human intelligence can add depth and perspective that a public records research effort may not be able to provide, giving insight into a potential hire’s management skills and personality — including whether they’re prone to embellish or fabricate information about themselves.

As the Yahoo! case has shown, the damage to a company for failing to properly vet candidates can extend well beyond the public relations arena and become an issue in the boardroom itself. Allowing outsiders to gain license to alter the composition of your company’s board due to someone else’s inaccuracy could doom a company — whether the person intentionally lied or was mistaken about information is moot once it becomes a tool for opposing interest to use against a company. In this instance, the adage that an ounce of prevention is better than a pound of the cure has seldom been more true. A seasoned fraud examiner can assist you in preventing an error or omission from placing your company’s direction at risk.