Hiring for a high profile position takes a lot of due diligence.  Take the example of Scott Thompson, whom Yahoo hired as its CEO. His downfall was his resume, which claimed that he had a computer science degree.  His failure to review his resume which, he claimed, the executive recruitment agency created, cost him his job and the company a major black eye.

An expert in the field of recruiting high-end executives, Keith Giarman of the executive search firm DHR International, confirmed that it is indeed uncommon for someone at Thompson’s level to author his or her own resume. Regardless, he failed to check it before signing off on it.

Or take the case of Sam Box, former president of Tetra Tech, Inc., who was demoted to vice president after it came out that he did not receive the Bachelor’s degree that he claimed to have earned.

"Nobody wants a high-profile bad hire," explains George Boué, HR vice president for Stiles Corp. The real-estate company in Fort Lauderdale, Fla., screens credit and criminal records for all newly hired managers.

So what if a potential hire has a bankruptcy in his or her background?  In one case, it led a former head of finance for a manufacturing company to lose out on a job with a hospitality business. He never disclosed that he had the bankruptcy in the first place, which is what led to his de-candidacy. The bankruptcy resulted from a failed business start-up bankrolled with personal credit cards, complicated by divorce and ill health.

Corporate investigations of executives, often costing as much as $50,000, are becoming more common.  These investigations cast the net wide when searching, from normal criminal and credit checks to Internet searches of issues that the potential hire may have been involved in. For example, there is a woman who lost out on a COO position when it was found her husband pled guilty to making union payoffs.

Then what about those executives caught up in harassment situations? Former Vante, Inc. CFO/Treasurer Adam Smith’s bullying rant of a Chick-Fil-A employee went viral on YouTube.  Not only was Smith fired; he likely will have a difficult time getting himself hired somewhere else.

Even honesty can be a warning sign to a company, though.  When Phaneesh Murthy became head of a unit at outsourcing company iGate Corporationin 2003, he informed the hiring managers about two lawsuits accusing him of sexual harassment brought by former staffers of his prior employer Infosys Ltd. The first one had been settled for $3 million, and the other suit was pending. iGate hired him anyway, and he advanced to CEO in 2008. The company fired him this year for allegedly failing to report a relationship with a subordinate.

The moral of the tale: if you do background checks on employee hires, also do them on executive hires.  It is worth the expense, especially if the hire turns out to be one that makes it onto “The Daily Show” the way Smith did. The fallout can be devastating, for employees, stockholders and the bottom line.

Source: Kroll Investigations, WebProNews 5/11/12, The Wall Street Journal 6/14/13