FEMA Flap Puts Cronyism in the Spotlight

The controversy serves as a reminder to check the backgrounds of all employees, regardless of their standing in the company hierarchy.

October 4, 2005

In the political fallout from Hurricane Katrina, the dirtiest five-letter word in American business and government may be “crony.”

When Michael Brown, the former head of the Federal Emergency Management Agency, resigned his post on September 12, the age-old practice of cronyism--i.e., favoritism shown to an old friend without regard to his or her qualifications--came under the media microscope.

Whether Brown was indeed a poster boy for the evils of friendly featherbedding or a fall guy for FEMA’s besieged parent organization, the Department of Homeland Security, remains to be seen. But human resource professionals throughout the nation may be uneasily looking at their companies’ executive hiring practices in the wake of revelations that no one in the federal government seemed to have done a rudimentary background check on the questionable résumé Brown submitted in 2001.

The résumé, which was posted on the agency’s Web site, was submitted when he was first hired by a longtime ally in the Republican Party to be FEMA’s then-general counsel. News organizations looking into FEMA’s behavior during Hurricane Katrina uncovered several discrepancies in Brown’s account of his job history.

There have always been land mines for the HR executive who’s faced with doing a background check on the golfing buddy of the CEO who’s angling for a job or has to tell the boss that a longtime friend submitted false information on a résumé. But the stakes are higher than ever, ranging from the kind of media scrutiny FEMA faced to a legal system that penalizes bad hiring via breach of fiduciary duty and negligent-hiring lawsuits.

“Any board of directors of an organization that condones not doing a thorough background check on any new hire, even if it’s for the CEO position, had better hope the stars are in alignment,” says Garry Mathiason, an employment law attorney and the chair of the compliance and litigation group at the Littler Mendelson legal firm in San Francisco.

Mathiason’s clients often claim they didn’t do a background check on a new top hire because they thought the process would be “insulting, because everybody in the industry knew this person’s reputation,” Mathiason says.

He cites an instance in which one client initially declined to do a background check on a potential CEO, a well-respected veteran within his industry.

When the background check was finally done, it revealed that the applicant had been indicted, but not prosecuted, for misappropriation of funds and, in a civil case related to the criminal indictment, had been found liable for damages. (The applicant was subsequently rejected for the CEO slot.)

But when an organization demands that all new hires, from truck drivers to the CEO, undergo a background check, pressure for giving a high-ranking candidate a pass is off. “And don’t let anyone complain about the cost,” adds Mathiason, who notes that some online background checks today cost as little as $5 a search.

However, an applicant who is friendly with the boss but lacks work experience related to an open position should not be automatically excluded in the hiring process, says professor Samuel Bacharach, director of Cornell University’s Institute for Workplace Studies and the author of the book Get Them on Your Side.

“Many of the best executives shine in positions where they had to learn on the job,” Bacharach says, “and hiring someone who is an ally of a leader is not inherently wrong. The truth of the matter is, leaders need people in their corner who are going to help them set an agenda and get things done.”

But when leaders hire on the basis of cronyism regardless of qualification, “the message the leader sends is one of exclusion, insecurity and payoffs. It also implies a certain fear of looking outside the leader’s circle,” Bacharach says.

“Mixing the terms ‘cronyism’ and ‘politics’ is a cheap shot,” he adds. “Cronyism implies incompetence and just keeps your career going in the short term. The best CEOs can identify their political allies who are also competent.

“That’s just good leadership.”

--Ross Johnson