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Why Boards Should Worry about Executives’ Off-the-Job Behavior

 


Harvard Business Review | January 8, 2020



The Harvard Business Review article, "Why Boards Should Worry about Executives’ Off-the-Job Behavior," features the Q&A session, “Everything Is Scrutinized,” with Russell Reynolds Associates Consultant Justus O'Brien. The Q&A session is excerpted below.

How do boards conduct due diligence on candidates’ personal lives?
We urge companies to have a specialized third-party firm do a full legal background check. You need the candidate’s consent, and it’s not cheap—it averages $10,000. About 85% of clients do this as a final step before making an offer; the others have an in-house process.

What typically comes up?
Past or pending legal matters. Issues with credit. Traffic violations. Restraining orders. Securities and Exchange Commission investigations. Everything is scrutinized. If you find an issue, you can ask the investigators to do a deep dive.

How do boards respond?
If something complicated or nuanced arises, we’ll often put directors on a call with the investigators. Let’s say the background check on a candidate shows a DUI within the past few years. Those come up from time to time. During the ensuing board discussion, directors might discuss the DUI, determine whether there are other incidents that establish a pattern of risky behavior, and explore the candidate’s judgment and truthfulness in explaining the situation.

Do boards really care about traffic violations?
Sometimes they do. A pattern of speeding violations suggests risky behavior. The investigators also pay attention to the circumstances. If someone gets several speeding tickets at 2 AM, that raises questions.

To read the full Q&A session and article, click here.



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Why Boards Should Worry about Executives’ Off-the-Job Behavior