What is the role of a board of directors in hiring senior executives, chief compliance officers, and even other board members? The hiring of a bad senior-executive hire can cost a company much more than simply dollars, particularly in the current hyper-sensitive social media environment. Both fiduciary risk and exposure for the board of directors cannot be overlooked.

Consider the example of Yahoo and its hiring of Scott Thompson in 2012. It turned out that Thompson had incorrect information on his online biography regarding his academic credentials. The key is for a company to engage in an executive due diligence investigation, rather than simply a routine or even executive-level background investigation.

Conversely, executive due diligence should consider all available public records, including criminal history, civil litigation issues, financial and legal issues, relationships with other companies and board advisory positions, reputation, misrepresented education and overstated work history, behavioral history (for example, litigiousness) and, in particular, undisclosed or adverse issues. It may take more time and be costlier but at this point, a board cannot afford not to do so.

Many executive-level job candidates fail a due diligence investigation. Consider how many senior executive slots your company has, and add to that seats on the board of directors, and you can quickly see the risk of failure to perform an executive due diligence search when promoting or hiring.

Moreover, you need to perform executive-level due diligence in other business situations as well, including on the senior management of new business acquisitions brought into your organization through a merger or acquisition, selecting new board members, screening corporate board and, of course, third-party business partners and other agents in the sales and supply chain channels. 

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