Vetting Potential CEOs for Sensitivity Issues

Ideally, boards should conduct more comprehensive background checks that include vetting candidates for public-speaking gaffes or a track record of making controversial statements. Do the candidate’s views align with—or at least not aggressively contradict—those of the company’s employees, shareholders and customers?

However, Andor Capital CEO Benton notes that CEO searches are often conducted by search firms. “We only get to call references. A reference check is not a background check. It’s just past performance. We rely upon the search firm to vet the candidates.” The problem, he says, is that social issues in the last five years have really become national issues, so there is a need to review collected data differently. What’s more, abandoning a well-skilled CEO over his personal politics can entail a different sort of fallout, notes Cornell’s Professor Collins. “If there is a sense that the board will not really support the CEO, that may hurt its ability to attract the right person.”

Collins urges boards to work with their companies’ communications teams to think through any issues that may be sensitive before a new leader is announced. He also notes that while most CEOs who have contracts have behavior clauses that may be used to terminate a CEO, to date, there are no real rules about limiting one’s speech. “Today, choosing a CEO requires a holistic approach,” says Collins. “It is no longer just about a technical fit. The person must also fit the company’s culture.”