Headhunters call for regulation to weed out malpractice

Earlier that day the bank had also received numerous phone calls from a woman who refused to leave a contact number. With the help of the police, the bank traced the fax numbers to a well-known London financial markets search firm, Hogarth Davies Lloyd.

While this might be an extreme example, there are always stories of dodgy practices by a few headhunters circulating around the market: job-seekers find their CVs are sent to employers without their permission, or clients discover that a recruiter is finding employees for it through the front door and taking them out again through the back.

Now, many recruitment firms are calling for greater self-regulation of their industry, in order to improve standards and weed out unethical practices by a minority which they fear are tarnishing the image of the whole sector.

Jonathan Astbury, managing director of the search firm Astbury Jones, is among those urging change. He says: 'Our industry has a poor reputation. It needs an organisation that can encourage professionalism and publicly censure cowboy outfits. Then if any recruitment firm doesn't sign up to belong to the organisation, clients and job-seekers can ask why not.'

Astbury says his firm will soon apply to join the Association of Executive Search Consultants (AESC), which was founded in the US and vets members for ethical behaviour and competence. It provides codes of conduct towards both clients and job-seekers.

The AESC thus performs many of the functions that Astbury and others are calling for, and its members include global firms such as Heidrick & Struggles, Korn/Ferry and Spencer Stuart. Its weakness is that only 24 Europe-based firms belong to it, so it is a long way from being able to influence the whole industry.

Two senior human resources executives at investment banks in London say they have never heard of the AESC.

But the organisation, which set up its European arm in Brussels in 1996, argues that it is becoming more influential, with membership nearly doubling in the last two years. It vets applicants through visits to their offices, reference checks and random inspections of files. 'Last year we refused membership to two or three small firms. We have very strict standards,' a spokesperson says.

Norbert Abraham, a partner in financial services in Frankfurt at Delta, an AESC member in Germany, says the organisation provides clear benefits.

'It's a proof of quality. It puts you in a group of professionals who follow the same rules, and distinguishes you from the firms with lower standards,' he says.

Abraham says this was particularly important in Germany, as the search industry there is less established than in the UK. It is also more fragmented, with many small firms of dubious quality.

In the UK, there is some, limited regulation of the industry under the Employment Agencies Act 1973. This requires recruitment firms to give job-seekers written details of their terms and conditions, for example.

But still, anyone is entitled to set up a recruitment firm, without any sort of background check. One search executive says he knows of an investment bank employee who was sacked a few years ago for taking bribes, and is now working successfully as a headhunter.

Gareth Llewys-Lloyd, a consultant at the search firm Wright and Partners, says: 'When we approach a candidate in a search, it's often the case that they've already been approached for the same position by an unmandated headhunter who's just trying to make a quick buck.'

Llewys-Lloyd believes it is improper for a recruitment firm to approach a potential candidate without a specific mandate. An effective body should be set up to regulate the industry in this and other matters, he believes.

A UK self-regulatory body already exists in the form of the Recruitment and Employment Confederation (REC), which has more than 6,000 corporate members across all sectors. But few prominent financial services recruiters are members, either at the search or selection level. The REC's influence on the sector, like that of the AESC, is therefore limited.

Some headhunters say they have not bothered to join the REC because they believe it lacks the teeth to improve standards. Ben Dear, managing director of the Cresta consultancy, says he would support regulation by a government agency as a way of seriously addressing a host of ills plaguing the recruitment industry.

One malpractice common in the IT sector is for a firm to close itself down while owing money to contractors, and then open up under a new name without any legal obligation to pay them.

He says internal abuses in the industry also need to be stamped out, such as monitoring consultants' phone calls without telling them.

Marcia Roberts, a director of the REC, acknowledges that the organisation needs a higher profile.

She says it is taking steps towards this, such as appointing an independent complaints commissioner. The REC could be an effective forum for clients to take incompetent or unethical recruitment firms to task, she believes.

It already runs training courses for recruiters, covering topics such as relationships with clients and candidates, interview techniques and legal issues. Andria Curran, one of the tutors, says: 'We teach best practice and the courses are very popular.'

She is also communications manager at Contact Recruitment, a financial services firm that is a member of the REC.

But many recruiters believe regulation of the industry is impractical or unnecessary. Gavin Bonnet, head of Alexander Mann Global Markets, says the downturn in the industry is already shaking out low grade and unethical members who were able to prosper in the boom.

He says: 'The financial services employers are the best regulators the industry could have. They know which firms they like to use and if they don't receive a high standard of service they won't use those firms again.'

Robert Walters, chief executive of the Robert Walters group, believes standards in the industry have been improving over the years. In any case it is too fragmented to lend itself to regulation, he says. 'At this firm, if a candidate makes a complaint I deal with it personally. Standards are pretty high nowadays at the big companies.'

For the time being at least, firms can operate without censure. Hogarth Davies Lloyd belongs to neither the AESC nor the REC and has not publicly explained its behaviour, except to say it has a strict code of conduct and would dismiss any employee who breached it.