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10 Reason why Executive Due Diligence is so important

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Cybertrace Team

October 9, 2019 · 6 min read

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10 Reason why Executive Due Diligence is so important

Given the current competitive landscape and growing unemployment rates, executive-level candidates are more willing to make overt misrepresentations that can be uncovered during the executive due diligence (pre-employment background check) process. Executives may make representations during the interview, such as embellishing or inventing credentials, omitting prior criminal records or regulatory convictions, providing false circumstances concerning their departure from a prior employer. There are many red flags that you should look out for, however, be wary of any candidate who does not consents to a pre-employment check, especially executive due diligence. We often see push-back from candidates with something to hide.

The challenge for corporate directors and management teams is to identify red flags and avoid potential embarrassment and negligent hiring litigation by properly vetting these candidates prior to making hiring decisions

Likewise, investors, bankers and venture capitalists share an interest in truly knowing who they are potentially investing in. Unfortunately, many investors only consider ‘what’ not ‘who’ when conducting due diligence for imminent investments.

You may have heard that Yahoo suffered a serious embarrassment when it was revealed that CEO Scott Thompson falsified his degree, and competent executive due diligence or even general pre-employment checks were not conducted. There have been a number of other high-profile individuals who have lied about their resumes, including matters that have recently been referred to the Independent Commission Against Corruption (ICAC).

By conducting thorough executive due diligence (executive level pre-employment checks), a qualified analyst can identify relevant issues concerning an executive’s professional career and personal history. This in turn protects the prospective employer or investor.

Cybertrace Global are experts in Open Source Intelligence (OSINT) techniques and identifying relevant red flags buried deeply in the web, including on social media. Often, individuals publish photos and content on social media with little regard to their potential audience. Unfortunately, the content has the potential to embarrass an employer or investor and damage a company’s reputation. Our techniques of assessing an executive’s social media will uncover any relevant content of concern.

1. Unverified Credentials

We’ve all heard stories of individuals who have provided mistruths about their prior employers, their level of seniority or their education. Candidates have also been known to misrepresent their professional achievements, choose which former employers they will declare or misrepresent their volunteer work. While a small mistruth may not necessarily be immediate grounds to disqualify a candidate, a minor misrepresentation can be an important indicator of a broader pattern of behaviour.

2. Bankruptcy

Disclosure of a personal bankruptcy report by a candidate may not be a ‘deal breaker’, however the specific facts surrounding the bankruptcy may be be an important indicator. A thorough review of associated documents can provide valuable information relating to the candidate’s previous income, debts owing or finalised and other assets held at the time of bankruptcy.

3. Reasons for Leaving a Job

While layoffs have been prevalent due to current economic conditions, candidates may use this fact to their advantage with prospective employees. During the interview, a candidate may mislead the prospective employer to believe that they were a victim of downsizing, when they were actually terminated for performance issues or disciplinary complaints. In addition to interviewing references to verify the provided information, former colleagues or business partners may shed light on the real reason an individual left the company. The discovery of litigation with a former employer may also produce relevant facts about prior conflicts.

4. Litigation

Records of civil litigation may be scattered throughout Australia and the Asia-Pacific region where the candidate has lived or worked. The first step in identifying relevant civil litigation is to locate and thoroughly research such jurisdictions; a review of pertinent court documents may identify accusations of misconduct, harassment or questionable business dealings.

5. Tax Liens & Financial Disputes

The existence of tax liens, judgments or financial disputes may suggest that the candidate is under financial pressure or may be living beyond their means. Candidates who are under financial strain may be more susceptible towards committing fraud. Executive candidates with access to a company’s finances are at an even higher risk of future embezzlement.

6. Drink Driving Arrests

A review of criminal records and driver licensing records within the appropriate region the individual has resided in could identify a prior drink-driving charge. Multiple charges or arrests may raise concerns about a candidate’s potential substance abuse problems, while police records relating to the respective arrest may identify other relevant information.

7. Prior Criminal Convictions

Typically a “hot button” item for corporate directors and hiring staff, it is vitally important to understand the wide range of differences between federal and state court procedures with respect to housing and disseminating criminal record history. Identifying a candidate’s address history and relevant jurisdictions is the first step towards locating potential criminal records. Depending on the territory searched and disposition of the respective criminal charge, many minor infractions and/or charges may not be identifiable. More prevalent criminal case files which are readily available, typically provide a wealth of valuable background information on a candidate (which may or may not be openly discussed by the candidate during the interview process).

8. Regulatory Issues

If a candidate has been professionally licensed or certified with a local, state or federal regulatory agency (i.e. state licensing boards, etc), they may have been sanctioned or reprimanded by the respective agency for professional misconduct.

9. Hidden Corporate Affiliations

Findings of associated corporations that an executive or their relatives have established raises questions about potential self-dealings or conflict issues. Note that this “shell” entity may have been set up as a vendor or customer to misappropriate funds.

10. Social Media Issues

Unlike the regular job boards, social media allows you to undertake pre-employment checks on your potential executive employees on a social level. You can gain more insight into their lives, personalities and their aesthetic — an organic and true resume. Not only can you begin to understand their personality, but you can also see how they interact socially through commentary and the types of accounts they follow. While it’s easy to spot red flags, it’s equally as important to look for what they are passionate about by exploring their feeds.

Please contact us for a confidential discussion relating to your due diligence requirements.

Tags: Pre-employment, Executive Due Diligence, Criminal records, Red Flags.

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