Background checks are mandatory for only a small number of jobs, however; corporations may also consider conducting background checks when trying to fill positions that require increased responsibility. Positions including senior executives, board members and those in the financial industry must be filled by individuals with a clean past in order to mitigate corporate risk. As outlined by the US Sentencing Commission (USSC), a good ethics and compliance program includes background checks.
Ethics and Compliance
In order to comply with SOX guidelines, publicly traded companies are required to conduct employee background checks for certain roles within the organization. Background checks are tools used to help implement internal controls, ensuring the company acts in an ethical manner. In Chapter 8 of the Federal Sentencing Guidelines, the USSC states:
“The organization shall use reasonable efforts not to include within the substantial authority personnel of the organization any individual whom the organization knew, or should have known through the exercise of due diligence, has engaged in illegal activities or other conduct inconsistent with an effective compliance and ethics program.”
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Companies need to evaluate the risks associated with each position. The information gathered from the interview process and background checks assists employers in making hiring decisions. Throughout the hiring process, companies must seek out potential employees who are a “fit” with company culture and who will work to uphold the organization’s reputation. In the eBook “Background Screening: Why Organizations Must Assess,” by Kroll, they write:
“Organizations conduct screening and typically consider how any prior misconduct relates to the specific job responsibilities to be performed, when the misconduct occurred and whether the individual has engaged in other misconduct.”
Conducting Background Checks
Many factors contribute to the decision to hire a specific candidate for a job. Every company needs to decide the point in the hiring process where background checks will be conducted. In order to complete a thorough background check, have candidates complete standardized personal history forms. On the form, go beyond current information and ask questions pertaining to past residences, any name changes, previous employers, education and criminal convictions. Break down each question in order to receive detailed answers.
Fraud and other offences may not always be committed in a candidate’s current state or country. Therefore a list of former residences allows employers to conduct a deeper, more complete background check. When creating background check policies, it’s important to address the grounds on which a candidate may not be granted a position. For example, if a candidate’s background check reveals they were currently charged with theft, they could possibly be a risk to the company if they are being considered for a financial position involving monetary transactions.
In the article “Best Practices for Conducting Background Checks on Director and Executive Candidates” on Corporate Compliance Insights, they write:
“With more information, a thorough background investigation can be conducted not only more efficiently but with greater accuracy. Knowing the counties in which someone has resided in is key to a through criminal history check. Knowing all convictions will give you a complete picture of the applicant. Potential felonies are frequently pled down to a misdemeanor; without knowing the totality of the convictions, important historical information about your applicant may never be known.
The application must be fine tuned to ask all the questions an employer would want to know, and ask them in a detailed fashion so the applicant is unable to provide vague answers. Education questions should include the name of the school and also the city, state, hours earned, name used while in school and honors achieved.”
Review and Update Background Check Policies
Compliance laws and industry regulations are constantly updated to meet the growing demands of the changing business environment. As the number of corporate scandals increases, regulators develop new rules to protect the public and hold corporations responsible for their actions. Here are some of the ways to ensure ethics and compliance matters are upheld during background checks:
- Re-evaluate corporate risks- Risks change as employees come and go in an organization. As industries evolve, companies go global, new vendors are chosen and new board members are elected, corporations encounter different risks. Set a specific time, either annually or every two years, to review company policies regarding background checks. Evaluate job descriptions and tasks in order to identify what can be done to mitigate future risk.
- Stay up-to-date on laws and regulations- Laws are constantly amended and changed, requiring employers to adjust corporate policies. Stay informed to better understand employer and employee responsibilities when reducing corporate risk.
- Screen current employees- Make sure all employees continue to meet the necessary qualifications to fulfill their roles in the company. Screening current employees allows employers to pin point employees who may now be a risk to the company. Once an employee is hired, they are still capable of getting into trouble. Periodically screen existing employees in order to mitigate corporate risk.
- Benchmarking- Look to industry leaders or other respected companies. Find out when they conduct candidate and current employee background checks and what information they collect from these groups.