May 23rd, 2024 | Sterling

Why Should Senior Management Undergo Background Checks?

In an era where corporate transparency and integrity are paramount, the significance of thorough background checks on senior management cannot be overstated. Recent incidents, such as the revelation about Jon Lee, founder and CEO of Singaporean startup Vizzio Technologies, underscore the potential risks associated with overlooking this crucial process.

This article highlights case studies of organisations which failed to run background checks on senior executives, along with the pivotal reasons why senior management should undergo comprehensive background checks to safeguard the reputation and stability of the organisations they lead.

A Cautionary Tale 

According to their website, Vizzio Technologies uses satellite imagery and AI (Artificial Intelligence) to produce “highly detailed, measured 3D digital building models”.  Vizzio had been touted as one of the “most promising startups” by The Information as recently as October 2023. This reputation helped them raise capital from major investors such as Singtel Innov8 and Sinovation Ventures.

However, Vizzio’s success story took an unexpected turn when it was revealed that the founder and CEO, Jon Lee, was previously known as Dennis Lee when he was the chief technology officer (CTO) at Elipva, a software development startup established in the late 1990s. Lee left Elipva amid controversy surrounding falsified credentials and awards that he used to attain the CTO role.

After venturing into business in China, Lee resurfaced in Singapore in 2019 as Jon Lee, founder of Vizzio. Despite initial success at Vizzio, Lee’s deceptive practices persisted.  He falsely claimed to hold a Ph.D. in computer science from the University of Cambridge. Tech in Asia investigated his background and debunked this claim, with Lee eventually admitting to forging his doctorate certificate.

This cautionary tale serves as a stark reminder of the critical need for thorough background checks, even at the senior management level, to maintain organisational trust and integrity.

A Turning Tide in Recruitment 

“There has been a growing ‘shout now, check later’ culture regarding senior executive recruitment in recent years. However, this type of hiring is problematic as evidenced by the many cases involving individuals in senior or high-paying positions who have faked their academic qualifications to secure the role.”Jaede Tan, Head of Client Success, International

Falsifying academic qualifications has unfortunately become much easier due to the accessibility of electronic documents and editing technology, such as Photoshop, as well as firms offering to fake certificates illegally for a low fee. An investigation by Channel News Asia discovered that obtaining a forged Singapore university degree certificate costs only US$700 and can be provided within a few days.

In addition to Jon Lee’s deception at Vizzio, some other recent high-profile examples of educational fraud in Singapore include:

What Are the Risks of Educational Fraud? 

The potential risks associated with educational fraud by senior executives are far-reaching and extend beyond mere deception. While some may downplay its significance amid more serious corporate crimes, the repercussions can be profound.

A failure to rigorously verify the educational backgrounds of employees can lead to several critical issues, including:

  • Lack of data security and protection – Data security has long been a paramount concern, as inadequate verification may expose companies to cyberattacks and leaks, both through negligence and active involvement of employees seeking financial gain. There have been several major cyberattacks in the past year or two, and the World Economic Forum has identified that the Asia Pacific region is the new “ground zero” for cybercrime incidents, averaging 1,835 attacks per organisation. Senior staff have broader access to company software and financial information, creating a higher risk if the wrong individual occupies the role.
  • Cost of a bad hire – Upon hiring a new staff member who does not actually hold the educational background they claimed to have, the cost of two hires is incurred. Not only has there been the cost of recruiting, onboarding, and training the first hire, but there is the added cost of having to do it all over again to find a genuine candidate who has an authentic background.
    The cost of a bad hire is further multiplied when you consider the potential risk that the first hire may act fraudulently when working for the company or fail to fulfil their responsibilities, thereby damaging relationships with customers, investors, and/or stakeholders.
  • Reputational risk – Senior executives are direct representatives of a company. Therefore, any action they take can potentially be attributed to the company. This is also true of any employee, particularly those who are customer-facing; thus, a dishonest employee can threaten the overall integrity and accountability of a company.
    According to Tech in Asia, “Elipva’s reputation never fully recovered after Lee’s fabrications were uncovered, even though it was a real business and had blue-chip customers.” Similarly, for Vizzio, one of the major investors and a prominent figure in the AI space, Kai-Fu Lee, stepped down from the company’s board soon after the revelation regarding Jon Lee, and now many of Vizzio’s partnerships are also at risk.
  • Negative workplace culture – A CEO and other senior executives are expected to exemplify leadership and integrity, setting the tone for the entire organisation. Therefore, when a senior staff member is exposed for engaging in dishonest practices, questions arise about the organisational culture. This negativity can filter down to other employees, leading them to believe that they can also act in dishonest ways when fulfilling their roles; or alternatively, it may make them question their safety in the workplace.  

How Can the Risk of Educational Fraud Be Mitigated?

Mitigating the risk of educational fraud involves concerted efforts at both government and organisational levels.  

At the government level, let’s examine the strategy taken by Singapore. A stark rise in cases of academic fraud in the nation, particularly by foreign workers using foreign qualifications, led the government to introduce strict regulations regarding the verification of academic qualifications of foreign workers. 

Under this framework, employers are required to submit proof of applicants’ educational qualifications as part of a point scoring system under a new ‘Compass’ assessment framework – to obtain an employment pass for the applicant. Minister of Manpower Tan See Leng said that the new verification requirement will “safeguard against gaming by submitting fraudulent educational qualifications,” noting that employers are already responsible for ensuring the authenticity of their hires’ qualifications.

The Ministry of Manpower also appointed Sterling as one of the 12 background check companies to provide employers with the services to verify the educational qualifications of foreign employees. This is also due to our high compliance and security standards, along with an extensive reach across all institutions. 

At the organisational level, companies can mitigate the risk of hiring candidates with falsified academic qualifications by conducting rigorous background checks before making hiring decisions. This screening could include educational verification as well as other screening methods, such as: 

  • Employment checks  
  • Identity verification 

For senior roles, the following can also be included to obtain a comprehensive overview of any new employee: 

  • Adverse media
  • Social media screening

Working with an experienced and reliable background screening company like Sterling helps to ensure that the verification process is seamless and timely. Sterling can also work with companies to tailor a suitable screening package aligned with the type of role and level being recruited.

Given the potential repercussions of candidate misrepresentations, it is crucial for companies to verify all candidates’ educational and employment backgrounds, especially those vying for senior executive roles. This proactive approach not only safeguards organisational integrity but also fosters a culture of trust and transparency in the recruitment process.

How Can Sterling Help?

Fraudulent incidents can be prevented by thoroughly vetting all your candidates, including senior management roles. Sterling supports organisations across different industries with global screening solutions to prevent similar incidents by thoroughly vetting all your candidates, including senior management roles.  

Services such as educational verifications enable us to verify the authenticity of educational qualifications against the databases of institutions and other reputable sources to ensure maximum accuracy and minimal turnaround time.

Learn more about how Sterling’s background checks and tech-enabled tools can help you to improve your workforce management and business success by contacting us

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.