Hunting Down Tomorrow’s Business Heads

By Anne Freedman
Published July 18 2006

Some companies are easier to recruit from than others.

Human resource executives wishing to keep their senior-level executives at home and away from their competition should take several factors into consideration, says Marc Lewis, president of North America for Morgan Howard Worldwide, based in Stamford, Conn.

Cash and bonuses are, of course, important, but so, too, are inspirational CEOs, equity compensation that is tailored to tie executives to the company, clear career paths and an organizational structure that recognizes and rewards top talent, he says.

Most HR executives probably think first of noncompete agreements when attempting to restrain employees from going to competitors. Unfortunately, while the existence of such agreements may serve as deterrents, such agreements are sometimes “not worth the paper they are written on,” says Joe Beachboard, a partner in the Torrance, Calif., office of the Ogletree Deakins law firm.

In states where court decisions seem to be more liberal, noncompetes are often found to be nonenforceable, he says. In California, they are unlawful. And for large multi-state corporations, which may transfer employees among different locations, that can create headaches.

Because of that, some companies have looked for other alternatives. One new trend is tying employment to stock options or stock grants, Beachboard says. If the employee does go to a competitor, the money realized from the options or grants must be repaid—a consequence recently challenged in California and upheld by the liberal U.S. 9th Circuit Court of Appeals, he says.

Lewis says Dell Inc. is one of the hardest companies to recruit executives from because the cash and equity compensation ties them into the company. “Executives cannot afford to leave as they will lose too much money,” he says.

Dell’s HR executives, however, say their compensation structure is not that different than most companies. “What I think is different is the performance level of our company that allows those elements in our compensation package to pay off,” says Dave Yetter, senior executive recruiter at Dell.

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