By Joann S. Lublin
The Wall Street Journal Online
Copyright 2013 Dow Jones & Company, Inc. All Rights Reserved.
Warning: Your personal life may disrupt your job search.
A former finance chief of a heavy-equipment maker failed to get hired this spring after a hospitality business discovered he had filed for personal bankruptcy in 2000. An outside prospect for chief operating officer of a professional-services firm was knocked out of the running when the firm learned her husband had pled guilty to union payoffs. A man seeking a senior post at a real-estate concern got turned down after management learned he had sexually harassed the wife of a prior business partner.
What went wrong? These executives didn’t simply have murky misdeeds in their past; they didn’t openly disclose them, causing embarrassment and raising questions about their judgment. Everyone knows you shouldn’t fib about your background, but sometimes omitting key information can be a deal-breaker, too. Even a single undisclosed drunken-driving citation could hurt your chances of landing the job.
Firms’ intensifying scrutiny of management candidates reflects boards’ rising worries about news-making scandals and failed hires below the CEO level, especially as they place greater emphasis on succession planning. In some instances, company leaders also fear that executives’ personal histories can affect their ability to do the job. And of course, firms want to know they’ve hired someone honest.
Nobody wants a “high-profile bad hire,” explains George Boué, human resources vice president for Stiles Corp. The real-estate company in Fort Lauderdale, Fla., screens credit and criminal records for all newly hired managers.
Corporate-investigation firms say they now cast a wider net when they probe management prospects. They examine run-ins with foreign regulators, speeding tickets, divorces, felonious relatives–along with regular visits to the local bar. Extensive vetting can cost employers up to $50,000.
About 33% of employers review at least 10 years of credit history for recruited executives, up from 23% in 2010, concludes a 2012 poll by the Society for Human Resource Management. The most important reasons for those checks include the need to reduce or prevent theft and embezzlement plus reduce liability for negligent hiring. That may be as employers look for a pattern of credit problems as opposed to issues related to the 2008 downturn, says Mr. Boué.
Executive candidates should disclose possible red flags once they become a serious contender—but before credit, criminal and reference checks begin. “Figure out what someone else will find out about you,” recommends Jane Howze, a managing director of The Alexander Group, a Houston search firm.
In the case of the former chief financial officer, a background-checking consultant found his bankruptcy filing just before the would-be employer, offered him the CFO role. His bankruptcy resulted from a failed business start-up bankrolled with personal credit cards, complicated by divorce and ill health, the consultant says. The offer “isn’t going to happen” because he never divulged those financial troubles to the hospitality company. Nevertheless, if the company had known about the indiscretions, the consultant adds, it would never have pursued him as a serious candidate.
Alexander Group uncovered spousal problems involving the aspiring chief operating officer through reference checks earlier this year. Her husband pled guilty to two counts for the kickback scheme in the late 1990s. His punishment included a year of probation.
The professional-services firm “wanted to know why she didn’t give us a heads’ up,” recollects John Lamar, another Alexander Group managing director. “There was a disappointment that she did not disclose it.” The firm chose the other finalist instead. Mr. Lamar says early disclosure probably wouldn’t have hurt her chances; he says she’s told him she plans to be more upfront “next time around.”
Similarly, insights about the alleged sexual harasser emerged while he was vying to run a division of an East Coast real-estate concern last year. Investigators at Kroll Advisory Solutions came across his victim’s affidavit in court documents for a settled business dispute. The woman told Kroll that he harassed her while both worked for her then husband’s company, says Peter Turecek, a Kroll senior managing director.
Of course, some misdeeds are more troubling than others. And whether your secrets cause problems will depend on your title—and a target employer’s culture. A personal bankruptcy looks very bad if you want to be a financial officer. A business headquartered in a small town with a conservative culture likely will look askance at an executive who cheated on his spouse.
Yet aspiring hires can take steps to avoid last-minute harmful revelations, experts say. Ms. Howze suggests asking recruiters for a chance to review background-check results for possible errors. She recommends making this request at the outset of the checks.
Plus, in coming clean about prior blemishes, “you have a chance to salvage yourself,” Ms. Howze says. The message to a potential employer is, “This is the deal. Let me give you the context,” she adds.
Candidates should also scrutinize everything that comes up in a Web search of their own names.
A slew of new services such as Reputation Changer Inc., which aim to cleanse online reputations, have seen brisk growth in recent years, with a chunk of that coming from executive clients. “Most executives worry about anonymous criticism and possibly inaccurate information about themselves online,” says the firm’s president Michael Zammuto. The former finance chief of a Midwestern manufacturer, for example, recently hired Reputation Changer to do damage control about her messy divorce and extramarital affair that got blasted over the Internet. She landed another CFO spot in March.
In many—but not all—cases, being upfront about the past can pay off.
It did for Phaneesh Murthy. He became head of a unit at outsourcing company iGate Corp. in 2003. Before joining iGate, he says he informed the top brass about two lawsuits accusing him of sexual harassment brought by former staffers of his prior employer Infosys Ltd. Infosys and its insurers had just settled the first for $3 million, and the other suit was pending.
Mr. Murthy advanced to CEO of iGate in 2008. It fired him this May for allegedly failing to report a relationship with a subordinate. An iGate spokesman declined further comment.
The ousted leader denied violating company policy. But he intends to tell future employers his side of the iGate story. “Full disclosure is far safer and more advantageous,” Mr. Murthy notes.
Dow Jones & Company, Inc.