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Background Checking for the C-Suite

March 2007 was not a good month for the Sun-Times Media Group.


As federal prosecutors in Chicago were delivering their opening statements in the fraud trial against former CEO Conrad Black, new Sun-Times CEO Cyrus Freidheim Jr. informed the board of directors of even more distressing news: The Colombian government was looking into his extradition for making payments to paramilitary death squads designated as terrorist organizations.


Freidheim had been CEO of Chiquita Brands International from 2002 to 2004. During that time, as part of a $25 million settlement with the Justice Department, Chiquita admitted to paying upwards of $1.7 million to paramilitary groups in Colombia.


Black was eventually convicted on multiple fraud counts, including that the media mogul had fraudulently used corporate resources and money to secure lucrative non-compete contracts and paid for personal vacations to Bora Bora and a lavish birthday party for his wife. Thankfully for Sun-Times, the Justice Department chose not to prosecute Freidheim for any alleged wrongdoing related to the payouts in Colombia.


Colombia has not since acted on its threat to seek Freidheim’s extradition, and he remains in his role as president and CEO of Sun-Time Media Group and publisher of the Chicago Sun-Times.


Corporate executives’ past offenses are not limited to extravagant parties on the company dime or funding paramilitary terrorist organizations, of course. Other high-profile CEOs have found themselves in hot water because of misdeeds in their pasts, such as former RadioShack chief exec David Edmondson, who was forced to resign after it became apparent that he had misrepresented his academic record on his résumé.


Even reality television has succumbed to fiction, as the Food Network recently fired Robert Irvine, star of Dinner: Impossible, for puffing up his résumé. Irvine represented that he had worked on the wedding cake for Prince Charles and Princess Diana and was employed as a chef in the White House.


Trouble at the top
   As these examples demonstrate, even the most sophisticated employers can falter during the hiring process when it comes to filling high-ranking positions within their organizations. A growing number of Fortune 500 companies have found themselves the subject of scathing front-page headlines for inviting grossly underqualified candidates, and even convicted criminals, to lead their ranks. And it is not just a problem facing large companies. Organizations of all sizes and shapes are inevitably faced with the task of hiring individuals who will wield considerable control over the directions their companies take, both strategically and financially. Beyond their impact within the organization, companies must also consider that executives are often the face their companies present to the outside world.


Despite the high stakes, employers continue to struggle when it comes to protecting themselves from high-profile résumé padders and ethically challenged insiders. Subpar screening of these candidates is usually to blame. Allowing the new CEO to bypass background checking procedures is no longer an acceptable risk—the legal and public relations consequences can be dire.


Even today, employers often sacrifice their background investigation procedures when it comes to high-level candidates with well-known professional track records and close ties to other executives inside the organization. Some organizations perceive it as an unnecessary formality, and many others succumb to the notion that it is uncouth to ask someone of such high stature to disclose past indiscretions.


Yet these employers, now more than ever, must re-evaluate their approach to the executive recruitment process and ramp up their internal screening strategies to better protect against not just legal liability, but also embarrassing press attention and damaged reputations. The higher the profile of the company or candidate, the more intense the spotlight will be when a hiring mistake is exposed, and the more inclined the public will be to further discredit the company and all involved.


While post-hiring exposure of criminal activity, past indiscretions or amoral proclivities may strike more fear in the hearts of HR professionals, egregious cases of résumé puffing are just as potentially damaging.


Inflated or outright false education and academic credentials have become common in today’s competitive job market. High-level candidates have also been inclined to misrepresent their career achievements and contacts, in addition to concealing gaps in employment, pumping up compensation and titles, claiming employment with nonexistent organizations and lying about why they really left their former company.


For these reasons, the vetting and hiring processes for high-ranking positions now require a much higher level of due diligence. This is especially true for organizations subject to the Sarbanes-Oxley Act, which also requires publicly traded corporations to assume greater accountability for new hires. (See sidebar story, “Tip Sheet for Executive Background Checking“)


Separation time
   Without question, the verification process must now be separated from the talent sourcing process. A company can no longer hire based solely on the recommendation of a reputable recruitment firm or even its own CEO. Yet, conducting adequate screening is an increasingly complex task for HR professionals. Not only must HR professionals deal with trying to fill a vacant position as soon as possible, but they must also attempt to verify applicants’ résumés and references to determine if applicants are who they claim to be.


Added to all these tasks, HR professionals must navigate murky legal waters to avoid exposing their companies to liability by improper background checks. Against this fear of improperly delving into an applicant’s background is juxtaposed the fear that an employer may not go far enough into determining the character and record of an applicant. HR professionals can avoid this Catch 22 by knowing their rights and the rights of every individual walking into the interview room. At the very least, an HR manager should take steps to verify the following about candidates for executive positions:


  • Are they who they say they are?


  • Have they been convicted of a serious crime, or one involving dishonesty?


  • Is their employment history accurate?


  • Are the stated academic and professional qualifications true?


A more extensive investigation, however, is oftentimes both appropriate and best practice for upper-level positions. This process is designed to uncover offenses ranging from insurance fraud to SEC violations, from a history of substance abuse to litigious behavior. Of course, with these measures comes an increased expenditure of time and money, not to mention questions on how and where to begin this screening process.


The most basic of background checks will cover educational background, employment history and any criminal past, in addition to interviewing independent references. Because HR professionals will rarely have the time and resources to perform adequate investigation, most aspects of the background check are better accomplished by a reputable third-party vendor or investigative firm with extensive experience in screening professional candidates. Although outsourcing the screening process will not immunize an employer from liability, it is a strong protective measure likely to withstand any cost-benefit analysis when it comes to high-profile hiring situations.


Much of the background information obtained by these vendors is culled from public sources—criminal and civil court records, lien and judgment filings, bankruptcy filings, SEC and other regulatory agency records, professional disciplinary records, driving records, military records, credit reports, sex offender repositories, etc. Some vendors even tout global coverage.


In addition to verifying identity and checking criminal records and civil judgments, these vendors can conduct media searches, verify professional licenses, contact educational institutions and conduct personal and professional reference checks. With the candidate’s consent, of course, they can also conduct interviews of spouses, neighbors, friends and former associates and colleagues.


Many employers will choose to perform some aspects of the investigation in-house, especially reference checks. For example, in some cases, HR professionals and executives within the company may be better off calling their own connections within a candidate’s former companies, rather than contacting a prepared list of references. Regardless of who contacts them, the references should represent supervisors, peers, subordinates and personal contacts. Additionally, the questions asked should not only address the key responsibilities of the position, but also the candidate’s fitness for employment with respect to moral character, integrity and reputation.


Reading between the lines
   Because many organizations are now quick to refer all reference-related inquiries to someone in payroll or an automated hot line that provides only the most basic information, a thorough reference check necessitates some professional networking and reading “between the lines.” Obtaining valuable information from references not only involves getting through to the right people, but also encouraging a deeper level of interaction.


While the reference provider may be reluctant to give specific information at first, engaging him or her in conversation will almost surely yield an overall sense or impression of the candidate. As long as the responses elicited consist of true statements that are not misleading, they are unlikely to expose the former employer to liability. The former employer is, however, right to fear the risk of litigation that comes with providing information potentially used as the basis for a candidate’s rejection. There are ways for the employer providing the references to protect itself, which include adhering to a clear policy regarding reference information and obtaining employee authorization.


Along with reference checking, basic Internet searches are also easily conducted in-house. For example, HR professionals should not underestimate the value of information obtained through basic a Google search. Social networking and blogging sites can be equally revealing.


Because a thorough investigation can take time, the company should notify candidates immediately that they will be asked to submit to a background check, and investigation should proceed only with written consent. Also, any part of the background check performed in-house should be thoroughly documented. Careful notes should be taken during reference interviews. This paper trail will go far in protecting the company from liability if the decision is questioned down the road. The employer should also respect confidentiality—only a select group of decision-makers should review and have access to information obtained in a background check. Individuals who assist with gathering or reviewing this information should do so conscientiously and in a manner that will not subject the employer to liability for invasion of privacy or allegations of negligence.


Navigating the murky waters of the background check may not at first glance appear to be an easy task. Armed with knowledge of the laws protecting applicants and the rights employers have in background checking, however, HR professionals can find a way of both complying with the law and protecting their companies from costly public blunders in hiring.


Moreover, employers cannot afford to not undertake the task of learning their rights in background checking an applicant. Time and money are well spent on a background check before a high-level employee is hired. Otherwise, companies will likely have to expend far more time and energy in dealing with the costs and expenses associated with making the wrong choice.

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When the Organ Transplant Involves Employee and Boss

For years, Charles Ward, 54, director of public safety at Methodist Hospital in Houston, suffered from polycystic kidney disease, but that didn’t keep him from working. Then last year his kidneys failed and he was forced to start dialysis. Not wanting to be tied to this routine, the manager started hoping for a kidney transplant. Word quickly spread through his department and four of his employees offered to donate a kidney. Last January, Joshua Phipps, 33, did just that. Phipps called it a small sacrifice. His boss called it heroic.

   It’s one thing for a boss to donate a kidney to an employee, which has occurred in several other companies, but when an employee is the donor and the boss is the recipient, it’s a slightly different matter that flashes warning lights for some workplace experts. The Methodist Hospital example is bound to be repeated: polycystic kidney disease, which is potentially fatal, affects approximately 600,000 people in the United States alone, according to theNephrology Channel Web site, and there are other reasons for transplantation as well.


   An employee’s illness can actually foster community in a workgroup as employees rally around and support an ill colleague. But as selfless as donating an organ may be, when it involves the workplace hierarchy it’s not quite as cut and dried as when a stranger, friend or acquaintance comes forward. The big issue is whether an employee is freely consenting to the donation or might feel pressure to do so, says Art Caplan, chairman of the Department of Medical Ethics at the University of Pennsylvania.


   “As long as employees aren’t getting pressured, bullied or bribed,” he says, there should be no problem. He adds that the psycho-social screening that the transplant center requires the donor and recipient to undergo before approving a transplant should uncover any problems.


   A second concern is whether other employees might feel the donor will receive special privileges as a result of such generosity. After all, the donor has given the boss not only a part of his body, in itself an enormous act, but a new lease on life. In one news report, Ward laughed off a question about whether Phipps’ generosity would impact his performance reviews. The hospital declined to comment for this article, which may hint at the sensitivity of this issue.


   The international nature of work today may also present cross-cultural issues when it comes to transplants, Caplan says. There are workplaces in which employees are in a more subservient role than in the U.S., such as in Japan. In these cultures it would be more difficult to say no when a kidney is being sought for the boss, he says. That may be an issue when Asian employees work in American companies on U.S. soil too.


   Dr. Maynard Brusman, a consulting psychologist and executive coach in San Francisco, questions the long-term ramifications of transplant between boss and employee. At first, it might seem that there are only positives, he says, but what if there are issues down the line? What if the employee loses his job because of cutbacks? Will he feel betrayed? What if his performance deteriorates? Will the boss be able to take the same steps he would with a different employee? What will other employees think?


   Brusman would like to see a doctoral dissertation on what occurs over 20 years in these transplant situations. He’s also concerned about invading a person’s privacy in the workplace. Companies often promote charitable acts like these. But what if the employee donor isn’t comfortable with the entire company knowing about his gift to his boss, and by extension, newspaper and Web readers or TV viewers?


   The U.S. Department of Health and Human Services’ Workplace Partnership for Life campaign is bringing organ donor awareness programs directly to employers and employees nationwide. As part of this campaign, for instance, theMid-South Transplant Foundation in Memphis, Tennessee, provides promotional materials on organ donation for companywide distribution. It also provides lunchtime speakers (either the recipient or donor family or both), materials and speakers for health fairs and informational fliers to stuff in payroll envelopes. This campaign does not directly promote donation between employer and employee, but could some employees interpret this encouragement as pressure if it’s a supervisor who needs a kidney?


   Today kidneys, hearts and livers are often transplanted, but Caplan predicts that with scientific advances, doctors may one day regularly transplant other organs—even faces. If it comes to that, he advises, companies may want to establish policies for certain types of transplants, because there may be even more psychological, emotional and social considerations in play.


   If potential donors want to help someone avoid lifelong dialysis—or can actually save someone’s life—it would be heartbreaking to stifle this most generous of impulses just because the person is the boss. Or, turning that around, it would be devastating for supervisors to think they should forgo a new kidney if the prospective donor is an employee, especially when live kidney donors are in such short supply.


   The picture is dismal for people needing other transplants as well. More than 82,000 people are awaiting transplants nationwide, according to the United Network for Organ Sharing (UNOS), and about 17 patients die every day while awaiting an organ. However, when the transplant involves an employer-employee relationship, companies might want to ensure they have carefully considered all the issues.

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Tough Times Dont Cut the Coffee; Perks Matter

Aaron Andersen still remembers the bitter day the Starbucks disappeared.

   Andersen, 30, now a budget manager at a Chicago nonprofit, recalls when the mermaid-logoed brew in the break room of his former office was switched to a random offering of whatever could be purchased cheaply in bulk or on sale.


   It was, says Andersen, “really, really bad coffee.”


   A seemingly small thing, yes. But grumbling ensued as employees read the muddy coffee grounds like tea leaves and didn’t like what they saw. When the technology and environmental services company lost contracts, which led to further cutbacks, the subpar coffee came to symbolize larger problems.


   As the cuts grew to include tougher scrutiny of expense reports and stingier rules for business meals and travel, experienced people started leaving the company. “People felt undervalued,” he says.


   Though the tiniest perks might seem expendable during tough economic times, when they get taken away it’s “like throwing salt in the wound,” says Phil Wallner, president of Glen Ellyn, Illinois-based Provident Link Ltd., an information technology recruiting firm.


   Wallner says he sees firsthand the damage done: Disenchanted employees “are more likely to take a call from a recruiter,” he says.


   “The little perks make people feel like they want to go the extra mile to get the job done,” he says. “When you remove those perks and you’re asking someone to still go above and beyond, you’re setting yourself up for some turnover problems.”


   As a consultant who also serves as an interim chief information officer, Mark Cummuta, 44, has witnessed various office dramas provoked by coffee.


   At one work site, the company kept staff supplied with free coffee and snacks to power them through late evenings. As money became tight, that small perk was eliminated and the team of programmers he was trying to motivate lost some fire.


   “The guys would say, ‘We’re out of coffee, and if I have to go to McDonald’s and get a cup of coffee, I’m not going to come back [tonight],’ ” he says.


   Two years ago, a client in California purchased a specialty coffee maker for one of its offices. The machine used more expensive packets of coffee that was high-quality.


   “How come they get the special coffee?” was the refrain heard in other branches.


   “People started grumbling,” Cummuta says. “The other branch managers got upset.”


   The small extras, he learned, tend to be taken very personally.


No more free lunch
   Mike Wolson, president of Naperville, Illinois-based Chicago Recruiters, says he often hears that point from professionals who have decided to look for new jobs.


   The removal of perks can be seen as “a little kick in the face,” he says. “It takes away that extra motivation to give that extra push of energy into the job.”


   Wolson recalls one company that used to provide lunch for employees on Fridays. The management cut what it thought amounted to little more than a small offering of good will, but the impact was much wider.


   “I don’t think anyone left because of that, but I also don’t think the water-cooler talk was conducive to the work environment for a while,” he says. “It highlighted other concerns people had.”


   Indeed, when a company starts cutting back on free subway cards or catered lunches, employees sometimes see it as the tip of the iceberg and expect more bad news to come.


   “It can make them start looking around,” says John Ryan, president of Chicago-based executive search firm RSMR Global Resources Inc.


   “The first reaction is, ‘We’re having financial problems. Maybe I should look for a new job,’ ” Ryan says. “If a company can be transparent enough to indicate that they’re just trying to cut back costs by 5 percent, maybe they can stave off any gossip or rumors.”


The perks that count
   Melissa Dessent, 39, a quality assurance business analyst, says employees at the insurance processing center where she used to work looked forward to Halloween parties, with cupcakes and costumes at the office. Then management changed and the Halloween parties evaporated.


   “I consider that happy, let’s-get-it-done-together attitude a perk,” she says.


   While some may see such a shift as small, it sent a message to her. “That’s what puts people in culture shock,” she says.


   Dessent says some companies “don’t seem to understand there’s more to coming to work than just going there, working for The Man.”


   “It’s the little stuff they give you, like a health club on premises or flex hours or even contributing to transportation costs. Those things really show that the employer cares,” she says.


   Carol Sladek, national leader of work/life consulting for Lincolnshire, Illinois-based Hewitt Associates, says employers must know their staffs to understand what sort of perks, small or large, will engender loyalty. What seems like a minor, smart decision to bosses may come at a high cost to staff morale.


   “Perhaps you take the free coffee out of coffee stations, then you find 95 percent of the population really valued it,” Sladek says. “These fun little perks are near and dear to people.”


   In 2006, Hewitt itself had to handle the fallout from a cutback when it started charging employees for their once-free cafeteria lunches. The perk was costly and only available in Hewitt’s North American offices, so it was deemed unfair to its other offices worldwide, says Tracy Keogh, senior vice president of human resources.


   The news wasn’t exactly welcomed by employees.


   “I’m always very careful in what I give out as a benefit because it’s very hard to take away,” she says.


   HR tried to convince them that they would benefit in other financial ways from the cutback, and many have since become attached to other perks.


   When Renee Zarazinski started her new job as a paralegal at Hewitt, she excitedly told friends about it. The benefits were one thing, but the first perk she shared with friends? The office had a Starbucks, subsidized by the company, where she could get her grande decaf for $1.70. At her old job in the Loop, she’d have to shell out more than $2 for the same cup, she says.


   “I was like, ‘Oh my god, this is great,’ ” says Zarazinski, 53. “It’s so much more convenient.”


   Yet it’s not always obvious which small perks will lead to mutiny when they disappear and which are barely noticed.


   At the former workplace of Andersen, the nonprofit exec, employees also lost their free bottles of apple, orange and cranberry juice.


   No one seemed to care about that. But the coffee episode still rankles.


   “It wasn’t so much, ‘They’re cutting down my income by a couple cups of coffee a day,’ ” he says. “It was, ‘They don’t value me as much as they say.’ “

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Standing Up to High Exec Pay Five Question with Robert Monks

In his recent book Corpocracy, Robert Monks discusses how companies today are too beholden to making a profit—and as a result their workforces often suffer for it. He denounces the levels of executive compensation today and calls on shareholders to get more involved in these issues. Workforce Management New York bureau chief Jessica Marquez recently sat down with Monks.

Workforce Management: Why should HR executives be concerned about the levels of executive compensation?


Robert Monks: Peter Drucker used to get very impatient with me about my talking about CEO pay. He would say, “Bob, you don’t understand the problem. The problem is that this has destroyed the teamwork between the people coming up in the company and the top people.” HR is the place where rubber hits the road on this.


WM: Do you think employees will start looking at executive compensation issues when choosing where to work?


Monks: I do think companies that have employment practices that are partnership-oriented are going to be much more attractive in terms of getting people to work there. I think for people to go work at a place where they have opportunity to be a partner in building something—well, that’s a very attractive prospect. Whereas going to a place where someone clearly has an advantage over you and he is going to be the boss over you is less attractive.


WM: Is there an opportunity for HR executives to work with shareholders?


Monks: I would hope that companies would come to a viewpoint that working with shareholders is a very important corporate objective. For example, Coca-Cola for years had very good HR people assigned to work with shareholders. As a result, they have been able to get through some very difficult situations with very little public adverse reaction to their reputation. Whereas when you file a shareholder resolution at Exxon, you don’t get a call from someone asking, “Can we talk about it?” You get a letter from a lawyer saying [what you are doing] is illegal. The contrast is sharp. Having long-term informed shareholders is in the company’s best interest.


WM: This year there have been a few shareholder proposals asking that shareholders be more involved in companies’ succession planning. What are your thoughts on this?


Monks: I think shareholders probably ought to have periodic access to management to make suggestions and nominate people. But shareholders aren’t competent to make the choice of who should be the principal executive of the company.


WM: Public companies often complain that they can’t invest in workforce management practices to the degree that they would like because shareholders are pushing them for short-term results. How do you respond to that?


Monks: Forty percent of ownership of American companies is by index funds or people who are constructively index managers but don’t want to admit it for fee purposes. That means they are permanent shareholders. There is so much talk about how much stock is bought and sold on a short-term basis. But for most companies, 40 percent of their stock owners are going to be the same people in and out, and they can very well count on that.


Workforce Management, March 3, 2008, p. 11— Subscribe Now!

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Workdays Challenge Product Development and Growth

Wrkday’s main challenge at the moment is following through on its product development plan and handling the company’s growth.


   Workday’s headcount grew from less than 100 in February of 2007 to about 220 in February 2008. Workday booked $26 million in revenue last year, and expects bookings to more than double this year.


   So far, about 80 percent of Workday’s employees are former PeopleSoft people. That’s a testament, in part, to PeopleSoft and Workday founder Dave Duffield’s legacy. His reputation is that of a salt-of-the-earth type who succeeded in an industry with more than its share of inflated egos and sell-at-any-cost personalities. And he remains a not-so-secret weapon for Workday.


   Duffield, 67, serves as both Workday’s CEO and “chief customer advocate”—a title that might seem phony in some quarters. But Workday stands out for its customer service, says Wes Bertch of Life Time Fitness, a Workday client.


   “We call, and they actually pick up the phone,” Bertch says. Life Time Fitness’s Michelle Bertch adds that Duffield is “a real person. He’s someone you actually want to talk to.”


   Duffield’s good-guy rep helped Workday win the business of H.B. Fuller Co., a Minnesota-based maker of adhesives used in cardboard boxes and other products.


   Steven John, director of global information technology for H.B. Fuller, said he usually doesn’t blaze the trail in adopting new technologies. But he made an exception with Workday.


   “Dave is a big piece of it,” John says.


   John calls himself a “second-generation” chief information officer, and his father’s experience with Duffield helped seal the Workday deal. “He worked with Dave Duffield and trusted him,” John says.


   Modest as he may be, Duffield has set an ambitious goal at Workday: He wants to reshape the business software industry, effectively repeating his history at PeopleSoft.


   IDC analyst Lisa Rowan says it’s hard to predict whether Duffield will succeed given today’s economic uncertainty. But, she said, “He’s a good bet.”

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Bill Gates Seeks Rise in Immigration of Highly Skilled Workers

If Congress does not allow more highly skilled foreign students to work in the country after they graduate from U.S. universities, American high-tech companies will lose their ability to develop innovative products, Microsoft chairman Bill Gates told a congressional committee on Wednesday, March 12.


At a hearing of the House Science and Technology Committee, Gates outlined immigration reforms that he said would help fill “a critical shortfall of skilled scientists and engineers.”


He also advocated improving science and math education and increasing federal funding for basic research.


On immigration, Gates urged lifting the annual cap on H-1B visas for highly skilled immigrants. Last year, the 65,000-person ceiling was exceeded on April 2, the first day that companies could apply for visas for the next fiscal year.


Gates also recommended that Congress increase the number of employment-based visas, or green cards, extend the time that foreign students can stay in the U.S. after they complete their degree, eliminate visa limits for individual countries and make more highly skilled foreign employees permanent residents.


H-1B legislation may not be viable on Capitol Hill. The immigration issue is volatile and brittle following the collapse last year of a Senate bill that would have increased border and work-site enforcement while creating a path toward legal residency for undocumented workers.


Gates essentially is calling for a targeted fix for highly skilled immigration. Without it, Microsoft and other firms will suffer.


“American companies simply will not have the talent they need to innovate and compete,” he said. “Our higher education system doesn’t produce enough scientists and engineers to meet the needs of the economy.”


Last year, Microsoft was unable to hire one-third of the foreign-born candidates it sought because the company couldn’t obtain enough H-1B visas. Gates warned that companies will relocate operations to countries where they can find scientists and engineers.


Microsoft opened a facility in Vancouver, British Columbia, in 2007. Gates praised Canada for policies that ease the hiring of foreign nationals.


“That government recognizes that competing for talent … is very, very important,” Gates said.


Gates received gentle questioning from most of the committee, which was celebrating the 50th anniversary of its founding with the hearing. Chairman Bart Gordon, D-Tennessee, referred to Gates as a “rock star.” Many of his colleagues were deferential and called Gates “sir.”


But Rep. Dana Rohrabacher, D-California, challenged Gates about whether H-1B visas deny jobs to American graduates. Even if they didn’t excel in school, they shouldn’t be shut out of the job market, according to Rohrabacher.


“These ‘B’ students deserve to have good jobs and high-paying jobs,” he said.


Gates acknowledged that Microsoft uses H-1B visas to attract the best talent from U.S. schools. 


“These top people are going to be hired,” Gates said. “The question is, what country will they work in?”


Once they’re on board at Microsoft, they can be catalysts for projects that create more openings. “The ‘B’ and ‘C’ students are the ones who get [the] jobs around these top engineers,” Gates said.


Rohrabacher also questioned whether Microsoft is ignoring unemployed U.S. scientists and depressing high-tech salaries through the use of H-1B visas.


“These jobs are going begging,” Gates said. “We’re not kidding. It’s not an issue of raising wages. We’re hiring as many people as we can.”


In an interview after the hearing, a former computer programmer who was in the audience disputed Gates’ assertion of a tight U.S. high-tech labor market.


“Total baloney,” said Gene Nelson, who lost his job with Genuity when the tech bubble burst earlier in the decade and is now an anti-H-1B advocate. “They’re asking for almost impossible combinations of qualifications.”


He also asserted that companies have the upper hand on immigrants because the firms own the H-1B visas. This allows them to depress the salaries of foreign workers. The visas are “a government subsidy,” Nelson said.


But Gates argued during the hearing that H-1B visas are an important weapon in the zero-sum talent war. It’s better to retain foreign graduates so they contribute to the U.S. economy rather than letting them work at home.


“Our youngsters are competing with [foreign] students, even if we turn them away from this country,” Gates said.


—Mark Schoeff Jr.


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Judge OKs Settlement in New York Life ERISA

After nearly eight years of litigation, a federal judge granted final approval of a $14 million class-action settlement in an ERISA lawsuit against New York Life Insurance Co. that was filed by employees alleging that the insurer mismanaged its pension funds by exclusively investing in its own mutual funds.


U.S. District Judge Bruce W. Kauffman affirmed the settlement in Mehling et al. v. New York Life Insurance Co. last week in U.S. District Court for the Eastern District of Pennsylvania.


The judge awarded $4.2 million of the settlement as attorney fees and administrative costs for the plaintiff party. The remaining amount will be deposited in the New York-based New York Life retirement plans to directly benefit the plans’ participants who were involved in the settlement class. In addition to the monetary settlement, New York Life also agreed to receive independent advice on their investments through May 31, 2010.


The suit stems from allegations that New York Life improperly invested billions of dollars in assets of various New York Life-sponsored employee benefit plans into New York Life mutual funds in a scheme to boost profits and help the funds appear more attractive to investors, according to the original complaint filed in November 1999.


Further, the suit alleges that New York Life’s actions drained millions of dollars in “excessive and easily avoidable” fees and expenses as the insurer’s trustees continued to invest in “inappropriate and over-priced New York Life proprietary vehicles” when better-performing options were available from investment managers unaffiliated with New York Life.


The plaintiffs argued that New York Life’s investment advisor also was president of the insurer’s mutual funds and that trustees who approved the pension investments were not made aware of options that would have been less expensive to maintain.


New York Life denied the allegations and “asserted that the plans’ investments, or menu of investment options in the case of the 401(k) plans, have at all times been prudently selected,” according to a statement by the insurer. The company further contended that ERISA does not prohibit the investment of a retirement plan’s assets in proprietary mutual funds offered by the plan’s sponsor, provided that the investments and fees are appropriate.


“The company’s receptivity to a settlement centered on the fact that the bulk of the settlement monies would go to work for the affected employee and agent participants in the plans,” said a spokesman for New York Life in a statement. “The result is a reaffirmation of New York Life’s commitment to its employees and agents through the company’s highly competitive benefit and pension plans.”


Filed by Jeff Casale of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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C-Suite February, 2008

People moving into key executive positions


Alfred Ramirez has been named director of talent acquisition and diversity at ACT. Prior to joining ACT, an organization best known for its college admissions exam, he was executive director at Diversity Focus. Ramirez is also the former president of the National Community for Latino Leadership in Washington, a national think tank for leadership development. He held several White House appointments in the 1990s, including special assistant to the president and associate director of the White House Office of Presidential Personnel. He also served as senior advisor at the Corporation for National Service and executive director of the White House Initiative on Educational Excellence for Hispanic Americans.


Kate Shehan has been named vice president of human resources at Morton’s Restaurant Group. Prior to joining Morton’s, Shehan was vice president and director of human resources and training for Crown Golf Properties. She has served on the board of directors for the Council of Hotel and Restaurant Trainers for four years


David Morrison has been named president of recognition award supplier Bruce Fox Inc. Morrison joined the company’s board of directors in May 2006 while serving as executive vice president of Evigna. Previously, he was president of Corporate-Elements.
Pamela Thompson has been named vice president of human resources for Olympus America. Most recently, Thompson was vice president of human resources at Tandem Labs. Before that, she was vice president of human resources at Teva Pharmaceuticals USA. She has also held senior HR positions at Wyeth Pharmaceuticals.
Bob Kovalsky has been named a senior vice president at Adecco. He will oversee Adecco’s newly established mid-Atlantic division, which encompasses the New York metropolitan area, Delaware Valley, Maryland, Eastern Pennsylvania, Northern Virginia and the District of Columbia. Kovalsky has run one of Adecco’s largest regions in the U.S. for the past six years. He previously worked at Olsten.
Chris Power has been named CFO of Salary.com. Before joining Salary.com, Power held several positions at Monster Worldwide, including CFO of global operations for Monster Worldwide and CFO for Monster Worldwide’s North America division. Prior to Monster Worldwide, Power was a vice president at Nortel Networks.
The Bostonian Group has appointed two new managing directors. Bob Clark has been named managing director of the firm’s retirement services practice. John Mancuso has been named managing director of the firm’s executive compensation and benefits practice. Previously, Clark was managing consultant for the retirement services practice. Before coming to the Bostonian Group, Clark worked at UBS, New York Life Investment Management and Cigna. Mancuso previously held positions at PricewaterhouseCoopers and Watson Wyatt Worldwide.
Margery Sinder Friedman has been named senior vice president at the Segal Co. An attorney, Friedman was most recently a member of the labor and employment practice group at Morgan, Lewis & Bockius in Washington.
Cynthia D. Sparkman has been named senior vice president of human resources at PreCash. Prior to joining PreCash, she was vice president of human resources for Cameron.
Ronnie Ng has been named director of sales and business development for the Asia-Pacific region at Cartus. He will be based out of Cartus’ Singapore office.

Submit your move


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Survey Hints at Drop in Hiring

Manpower’s latest quarterly employment outlook survey showed its weakest hiring projections in four years.


The report, released Tuesday, March 11, revealed 9 percent of the 14,000 U.S. companies responding to the survey expect reductions in staff levels between April and June, according to Melanie Holmes, vice president of corporate affairs for the Milwaukee-based staffing giant. A majority of respondents—60 percent—expect no change in their workforce levels, and 26 percent plan to increase hiring.


By comparison, during the first quarter of 2004, 13 percent of employers anticipated cuts in staffing, while 61 percent thought headcount would remain the same and 20 percent projected increases.


Manpower’s outlook at the same time last year was somewhat stronger, with 7 percent of respondents anticipating staffing cuts.


Despite the tepid outlook, Holmes says this shouldn’t be troubling for the labor market.


“We are not seeing any signs of mass panic out there,” she notes. “Companies seem to be taking a wait-and-see approach.”


Holmes says this cycle is different from previous recessionary periods because it is less volatile. The market is not experiencing the historic dips that normally precede an economic downturn.


Nevertheless, employers are hesitant to move aggressively with hiring plans, she notes.


Evidence that the labor sector is losing steam seems to be mounting. The Bureau of Labor Statistics has reported two straight months of negative job growth. According to its most recent report, 63,000 jobs were shed from the economy in February. That is on top of the 22,000 that were lost in January.


These figures are of concern, says Sylvia Allegretto, an economist at the University of California-Berkeley Center for Labor Research and Education. Given its population and economy, the U.S. should be adding 150,000 jobs a month. Jobs in manufacturing, retail trade and construction are the weakest, according to the BLS reports.


This pattern is similar to the results in Manpower’s 2008 second-quarter job forecast, where companies in mining, manufacturing and construction reported decreases in hiring confidence. By contrast, companies in transportation and public utilities are expecting increased staffing levels, albeit slight ones, according to Holmes.


Employers in the West and Midwest are projecting the weakest hiring outlook in the coming months, while companies in the Northeast and South are expecting relatively stable hiring plans.


Manpower’s report also examines the global job outlook—shedding light on hiring activity in 32 countries and territories. The second-quarter outlook is a mix globally, Holmes explains.


Employers in Australia, Hong Kong and Singapore are reporting the most optimistic projections. By contrast, companies in Spain and Italy indicated the weakest hiring outlook in the second quarter.


China’s year-over-year hiring projections are weaker across every industry, casting a cloud of uncertainty over the coming year.


—Gina Ruiz

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CFOs Put Out ‘Help Not Wanted’ Sign

A Department of Labor report showed that corporate payrolls shrank by 63,000 jobs in February. The decline—the biggest drop in nearly five years—follows a loss of 22,000 jobs in January.


Gloomy stuff, and it appears that accounting and finance specialists are not fully immune to this bleak job market. A survey of some 1,400 finance chiefs released Friday, March 7, by staffing firm Robert Half International has led the firm to forecast a mere 4 percent increase in the hiring of corporate accounting and finance workers in the second quarter.


Indeed, 85 percent of the polled CFOs said they do not anticipate making any personnel moves in the next few months.


Of the 9 percent of CFOs who are expecting to bring on new hires, 41 percent said they were doing so to address the demands of business growth, while roughly a third cited rising workloads.


Robert Half noted that employers who are hiring are typically looking for help with general accounting, internal controls or compliance initiatives.


One bright spot: Audit firms still appear to be actively courting talent. The National Association of Colleges and Employers reported this week that accounting services firms and financial services firms were among the most aggressive suitors for the current crop of college graduates.


Filed by Matthew Scott of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.