How far back
do recruiters check top executives' track records?
Apparently,
not far enough.
The executive-search
industry is in an uproar over this week's disclosure that Albert
J. Dunlap, the fired chairman and chief executive of Sunbeam Corp.,
also was axed from two prior jobs -- and that the two major search
firms checking his employment history never uncovered those dismissals.
The firings,
reported by the New York Times and confirmed by Mr. Dunlap's attorney,
Donald Zakarin, seem sure to trigger a major shakeup in how recruiters
pursue background checks of high-level candidates. It also could
spark litigation. While businesses depend on search firms to validate
prospects' employment records, many recruiters contend it is impractical
to investigate the jobs held by a senior executive more than 15
years ago.
"I
wish I could tell you there were industrywide standards...in how
you check employment history. But there aren't," said Patricia
Cook, owner of a small search boutique, Cook & Co., in Bronxville,
N.Y., and a former recruiter with industry giant Heidrick & Struggles
International Inc. "As an industry," she said, "we need to repair
our own docket."
Mr. Dunlap,
ousted by Sunbeam in 1998 amid allegations of accounting irregularities
at the Boca Raton, Fla., company, "was terminated" by Max Phillips
& Son after seven weeks in 1973 and by Nitec Paper Corp., in 1976
after two years as president, according to Mr. Zakarin. It previously
had been widely believed that Mr. Dunlap joined American Can Co.,
in 1975 after working for another paper company, Sterling Pulp
and Paper, between 1967 and 1975. American Can knew about his
Nitec stint, the lawyer said.
Mr. Zarakin
also confirmed Mr. Dunlap and Nitec were embroiled in lengthy
litigation that alleged fraud involving its reported profits during
his tenure, but said those "allegations are untrue." The suit
was eventually settled. Mr. Dunlap, 63 years old, didn't return
calls seeking comment.
The revelations
"are troubling," a Sunbeam spokeswoman said yesterday. The consumer-products
maker filed for bankruptcy-court protection in February, saddled
by more than $2 billion in debt dating to Mr. Dunlap's tenure.
"The previously undisclosed allegations about his conduct as a
senior corporate officer certainly appear to offer a parallel
to his tenure at Sunbeam," she continued.
Sunbeam used
recruiters Korn/Ferry International to recruit Mr. Dunlap in 1996.
"We conducted an exhaustive search for our client," a spokesman
for the big Los Angeles firm said. In a statement, Korn/Ferry
added: "This is a unique case of a highly placed and very public
individual with a strong track record of success whose omissions
in his job history of almost 20 years ago were concealed enough
to elude years of public scrutiny."
At Scott
Paper Co., which Mr. Dunlap ran before joining Sunbeam, "we assumed
that the (Dunlap) record was complete," said Boston management
consultant Richard Lochridge, a former Scott director. SpencerStuart,
another major search firm, helped Scott find Mr. Dunlap in 1994.
Doubts arise about a search firm's quality "if there's a big hole
like that in (the Dunlap) resume that related to his performance,"
Mr. Lochridge believes.
In a statement,
SpencerStuart said, "We are confident that the portrait we developed
and presented to Scott Paper reflected his (Mr. Dunlap's) pertinent
experience and executive talents." Among other things, the recruiters
gave Scott directors about 10 written references about Mr. Dunlap.
Kimberly-Clark Corp. acquired Scott in 1995.
Nevertheless,
an informed individual says, SpencerStuart relied on Mr. Dunlap's
personal account that he had left Sterling Pulp for American Can
because he didn't supply a resume. Nor did the search firm consider
his record before American Can because it believed his prior employment
wasn't relevant to the Scott Paper assignment.
"What are
they [recruiters] being compensated for if they're going on a
presumption of someone's employment history?" wondered another
person close to the Scott board. "It's about the weakest excuse
I can think of."
One SpencerStuart
executive, speaking on condition of anonymity, said that based
on information supplied by Mr. Dunlap and his references, there
were no indications "of any irregularities in his conduct as an
executive and therefore, no reason to believe that further investigation
was necessary."
Gary Roubas,
a former Scott director who head the board's CEO search committee,
said he "thought the SpencerStuart guys did a pretty thorough
job" of checking out Mr. Dunlap, who earned the nickname "Chain-Saw
Al" for his mass firings at Scott and elsewhere. But until yesterday,
Mr. Roubas didn't know the search firm had failed to look into
Mr. Dunlap's employment record before he joined American Can.
Several other
recruiters said pressure to complete assignments quickly and protect
the identities of the hottest prospects sometimes prevent exhaustive
employment history checks. "I don't see any search firm...going
back to verify jobs held by executives more than 20 years ago,"
a veteran headhunter said. "Is it too far back to check? Probably
not...But it's just impossible to check every detail of a person's
background."
The Dunlap
imbroglio was hotly debated within Korn/Ferry and SpencerStuart
yesterday, individuals close to both firms said. The embarrassing
lapse "raises a major red flag for clients to begin having this
discussion [with recruiters] as to what a full and complete background
check means,' said Scott Scanlon, chairman and CEO of Hunt-Scanlon
Advisors, search-industry consultants in Stamford, Conn.
In the past
five years, only a handful of employers have sued their search
firm over a recently recruited executive's undisclosed shortcomings
that related to subsequent misdeeds. Sunbeam has yet to decide
whether it will sue Korn/Ferry, the company spokeswoman said.
