No ethical breach when companies target and hire competitor’s employees

Employees should decide whether to respond to poaching efforts

Media Contact:
Amy Wolf
Senior Public Affairs Officer
Vanderbilt University
(615) 322-NEWS | amy.wolf@vanderbilt.edu

Feb 1, 2010

NASHVILLE, Tenn. – It’s generally accepted among business leaders that “poaching” or hiring a competitor’s employees violates an unwritten rule of business  and may be unethical.  A new research paper concludes that as long as their actions are not deceptive or illegal, companies that intentionally identify, contact and offer employment to a rival firm’s employees are within the bounds of ethical behavior.

In “The Ethics of Lateral Hiring,” a Vanderbilt professor who specializes in strategic human resource management suggests that the practice of “poaching” other companies’ employees should be an accepted or even encouraged form of business competition.

Companies that declare an ethical breach following the loss of an employee to a rival are claiming ownership of employees in a way that hearkens back to feudalism and indentured servitude, said Tim Gardner, associate professor of management at Vanderbilt’s Owen Graduate School of Management.

“When my colleagues and I started this project the first questions we tried to address were:  Where did employers get the idea they owned their employees’ energies, efforts and human capital? And why does that line of thinking continue today?” Gardner said.

Based on the authors’ review of historical and contemporary accounts of the employment relationship, they concluded that modern employers don’t generally believe they “own” their employees.  But by suggesting, even subtly, that lateral hiring is unethical, employers are misusing ethics to try to prevent rivals from using a common, fair and competitive business practice, the study says.

Instead, responsibility for entertaining or rejecting an outside offer rests with the employee in question, the authors suggest. Only employees can determine whether, for example, a current employer provides a collaborative environment or whether they have reaped the benefits of educational and training opportunities and owe their current employer more time.

“Another tactic is the so-called ‘gentleman’s agreement’ among firms that discourage lateral hiring. That is not much different from gas stations on the same street corner agreeing to keep the price of gas high,” Gardner said. Informal agreements not to hire each others’ employees benefit the colluding employers to the detriment of the employees.  Since the employees are not party to these agreements yet are affected by them, the practice is clearly unethical, the authors say.

Gardner and his colleagues point out such agreements might also be illegal.  In June of 2009, the U.S. Department of Justice opened an investigation of Google, Yahoo!, Apple, Genentech, and others for allegedly agreeing not to purposefully target and recruit each other’s employees.

The paper is to be published in a forthcoming issue of Business Ethics Quarterly. Co-authors with Gardner are Jason Stansbury of Calvin College in Grand Rapids, Mich., and David Hart from the Marriott School at Brigham Young University. To access the article, go to: http://societyforbusinessethics.org/images/Documents/Articles/beq_gardner_stansbury_hart.pdf

Vanderbilt Owen Graduate School of Management is ranked as a top institution by BusinessWeek, the Wall Street Journal, U.S. News & World Report, Financial Times and Forbes. For more information about Owen, visit www.owen.vanderbilt.edu.