When it comes to financial advisers switching firms, the old adage – loose lips sink ships – holds true.
When a financial adviser is plotting to jump ship, the temptation to tell clients is often strong. Stifle it, and stay mum.
New firms often don’t appreciate being drawn into lawsuits or arbitration over solicitation. Clients don’t like it, either.
“You’re also potentially subjecting your clients to be asked to testify as to the nature and scope of your communications,” said David Harmon, an employment attorney and partner at Norris McLaughlin & Marcus in New York. “If you want to keep yourself out of trouble, you don’t inform clients.”
For full article, click here to go to the Wealth Management Journal for the Wall Street Journal.
Whether promoted from within or from the outside, the new boss will need help to succeed. By “getting on board” as a “team player” and becoming a strategic asset, you should create personal career enhancement, rather than a premature termination. See great article in The Wall Street Journal (March 6, page B8) by Joann S. Lublin, “How to Prove Your Worth to the New CEO.”
Is Jefferies Group Inc. moving against the grain by paying bonuses in cash or are they setting a new trend? Hard to predict.
In yesterday’s Wall Street Journal, Lunch Break: Jefferies in Flap Over Plans for Bonuses in Cash discusses backlash to Jefferies’ election to pay bonuses in cash rather than in stock. On my mind is the collection headache Jefferies may have created for itself, which may inure to the benefit of the bonus recipients.
Since bonuses are typically subject to promissory notes or clawback agreements, the company will have the right to pursue the return of the bonus cash based on the terms of those notes or agreements in the event an employee is terminated or leaves its employ. In the case of cash bonuses, the right becomes a burden, creating a distinct “cash problem.” It differs from the forfeiture of unvested equity upon departure, which is typically immediately imposed upon certain events of termination and does not require a collection effort.
As the article contemplates, this will be an experiment worth watching.
Today’s The Wall Street Journal reports in Beware the Phantom Job Listing (page B7) the increase in “back channel” hirings — where it is ” who you know” that is making the difference in job searches. This trend is occurring against the backdrop of regulatory requirements concerning job postings. The take-away from this article reinforces the importance of the candidate’s network, especially in this weakened economy.
In the arena of post-employment non-solicitation/confidentiality litigation, employers and employees should be aware of a November 15, 2012 decision by the First Department of the Appellate Division of the Supreme Court of New York in AllianceBernstein LP v. Atha. In this case, Atha, a financial analyst who left AllianceBernstein (AB) for Morgan Stanley, was sued by AB, claiming he violated the confidentiality provisions of his employment agreement by taking confidential information, including client lists, to Morgan Stanley for the purpose of soliciting those clients. As part of its action for a TRO, AB sought and the lower court ordered that defendant turn over his iPhone to determine the scope of confidential information retained by Atha. The Appellate Division reversed holding that “[t]he iPhone would disclose irrelevant information that might include privileged communications or confidential information.” Notwithstanding, the court’s decision, it still ordered the defendant to provide his iPhone for an in camera or in court review to “ensure that only relevant, non-privileged information will be disclosed …” (quotes from the decision of the Appellate Division, First Department).
UBS plans to cut its ranks within its investment bank (see UBS Plans Cuts at Investment Bank, The Wall Street Journal, page C2) highlights the need to be prepared for such an event, regardless of the industry in which you work. Similar to disaster recovery plans that businesses implement, an individual should also be prepared — on the legal front. While I advise clients to keep their options open, that is not always possible. Regardless, one should maintain a file containing critical employment documents, including the following:
- Offer letter
- Employment agreement
- Confidentiality, non-disclosure, non solicitation, non competition and/or inventions/work for hire agreements
- Employee handbook and any supplemental policies
- Email or other correspondence relating to the employment relationship, policies and performance reviews
- Equity documents, pension documents, stock options, RSU, plan and grant documents
- Account statements reflecting current positions
- Employment history
With the above information in hand, counsel is in a better position to provide strategic transition counseling when events require reaching out for guidance.
- Be Sure of the Meaning. An illustration of the importance of the meaning of the terms is found in the definition of “active working status.” We recently handled a negotiation for an executive who had received an employment agreement that provided that only employees who are in “active working status” on the bonus payment date would be eligible to receive a bonus for the prior performance year. Without fine-tuning the definition and its relationship to the termination provisions, the executive could have been denied compensation and benefits that had accrued during his years with his employer, regardless of the reason for termination.
- Review the Restrictions. Now, more than ever before, companies need to protect their trade secrets, confidential and proprietary information, property, customer and employment relationships through the imposition of restrictive covenants. Employers take various approaches to these covenants. These restrictions are in effect during the employment relationship and post-employment; sometimes only during the period in which severance is paid, sometimes regardless of whether the executive is on the sidelines for months, or in some cases, years. The goal for the executive is to limit the time and geographic range of the restrictions and confine them to certain competitors or customers. Essentially, the executive has to determine the extent to which he or she is comfortable with signing away post-employment flexibility should the employment relationship fail.
Negotiation of the compensation package can be the most significant part of a career move. Remember to examine the “fine print,” and seek counsel as needed, to understand the interplay of the provisions of the employment agreement, and accompanying equity and benefit plan documents, to ensure a successful employment relationship, or the best protection if things don’t work out.
The Wall Street Journal reported that thousands more banking and trading jobs will be cut. Some firms plan to cut experienced employees and replace them with more junior folks and utilize “campus hiring.” This is interesting. To save on expenses, the bank will eliminate more experienced employees, while keeping younger, less experienced, and, without question, less efficient employees. Therein lies the true cost of expense reduction.
- The Termination Scenarios. Defining the circumstances under which the employment relationship can be terminated is essential. Considerable attention should be paid to the definitions of “cause” and “good reason.” Not focusing on the details of the definitions can have costly ramifications. Employers seek a broad definition of “cause” to afford greater latitude in terminating an executive and avoiding an obligation to pay severance. In response, the executive strives for a narrow definition of “cause” that avoids discretionary and qualitative terms. On the other hand, the executive should strive for inclusion of provisions that enable him/her to trigger a termination for breach by the employer and still receive maximum contract benefits and payouts. This is typically referred to as a “good reason” termination. It is also helpful to consider how the executive will be treated in the event a change in control of the employer occurs. And all termination must be viewed against the backdrop of IRS Code Section 409A, creating a labyrinth of possible tax liabilities.
For steps 1 through 4, please see posts:
Part I: Negotiating the Employment Package That Is Best for You – The Fine Print Matters
Part II: Negotiating the Employment Package That Is Best for You – The Fine Print Matters
Part III: Negotiating the Employment Package That Is Best for You – The Fine Print Matters
What a deal!! Duke Energy inks an employment agreement with CEO (a deal that was contemplated in its merger agreement with Progress Energy) and one week later, he is terminated. Under his severance arrangement, he is slated to receive severance payments in the neighborhood of $44 million, including severance, cash bonus, special lump-sum payment, and accelerated vesting of his stock awards (see “Behind Duke’s CEO-for-a-Day,” Wall Street Journal, page B6, Friday, July 6, 2012). His lump sum payment is due provided he cooperates with Duke and does not disparage the company.
Were the parties acting in good faith? Did the Board meets its obligations? More to come, I am sure.