Financial background checks for executive candidates – are they needed ?

Kris Dunn wrote an interesting post at the HR Capitalist last week titled “YOU MAKE THE CALL: Are You Responsible For Knowing That This Executive Hire Was About to File Bankruptcy?”.

He describes the situation of a company that was surprised when the senior executive they hired filed for bankruptcy and asks readers whether they think HR should have performed a financial background check as part of the recruitment process.

Are you responsible for knowing the hire you made was in financial trouble?

The answers I read were all pointing to “yes, HR should have known – but often these top recruitments are made with very little involvement from HR”.

My view is quite different and I wanted to share the reply I posted to this article :

“I find this question interesting because it is typically US.

In my country of origin, credit checking is considered as potentially leading to discrimination during the hiring process. One’s financial situation is also considered as private. As such, checking on the financial situation of a candidate or an employee is illegal and we don’t even really have such credit rating organisations.

Personal bankruptcy is also alien as a concept to us – people can’t accumulate debt and walk away from it starting anew. They have to face the consequences of their financial decisions. There are stricter regulations as to the amount of borrowing and debt you can have compared to your income so such extreme situations as the one you describe are virtually impossible.

Throughout my career in various countries in the EMEA region I have never encountered a company that even considered checking the financial situation of the candidate, even if that was not illegal in some countries.

In 18 years in Compensation & Benefits, I have had to intervene only once in the case of a senior employee who had abused corporate credit cards because of his personal financial liabilities. We had a control process and became aware of that pretty early through Internal Audit, and I was able to put in place a plan that recovered the sums, protected the company and supported the executive.

From that standpoint, given the tens of thousands of employees that I have been in charge of, I consider that the risk is pretty low – we lost a lot more through employees stealing company product in our manufacturing plants for example.

So I guess it’s my cultural background, along with experience, that makes me say that it is not the company’s business to investigate the financial profile of a candidate.”

What do you say ?

 
 

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