Where has personal integrity gone?
Following the recent news about David Donatelli’s sudden defection from EMC to HP, blogging pundits jumped at the opportunity to debate the nature of non-compete agreements.
Over the past couple of days I have read more than a dozen blog entries on the topic, written by industry analysts and veterans, and [in my humble opinion] every last one of them - including StorageMojo’s own Robin Harris - completely missed the big picture.
The significance of stories such as EMC v. Donatelli is not about the value, validity or necessity of non-compete agreements. Rather, it’s about the erosion of personal integrity, character, responsibility and accountability in our society. In today’s entitlement culture it seems that verbal and written contracts are meant to be broken at our convenience. We freely and willingly (i.e. without bribe, threat, or compulsion) enter contracts to obtain the things we desire. Then, when it is no longer in our interest or we simply change our minds, we seek ways to undermine, void, or circumvent our contractual obligations and commitments.
Clearly that is the case here. Donatelli’s resignation from EMC was almost immediately followed by the filing of a suit against his former employer by way of California Superior Court under the state’s Business & Professions Code Section 16600. It certainly seems like an effort to use California law to invalidate a legitimate agreement he willingly signed while working and residing outside California. And according to public sources, he profited handsomely as part of the EMC machine since he signed the agreement in 2002 including more than $17 million dollars over the past three years alone.
Just because we can do something doesn’t make it right.
It is a strategy similar to the one used and abused by plaintiffs in patent lawsuits who choose to file in the patent-friendly Eastern District of Texas even when one or both parties have little or no material connection to the district. Plaintiffs take the fight to the venue most likely to support their position. California typically does not recognize non-compete agreements, so it makes sense for employees who wish to escape their contracts to attempt to move the fight to California. Donatelli’s actions thus far are completely legal, though (I would suggest) morally and ethically questionable. [Update 5/18/09: See Advanced Bionics Corp v Medtronic Inc. In 2003, CA Supreme Court recognized that CA is not a safe zone for those who wish to escape legal obligations in sister states, and that interpretation of Section 16600 has become too broad.]
Obviously he was fine with signing the non-compete in 2002 so that he could continue to enjoy the perks of executive life at EMC. He was free to choose not to sign the agreement and find employment elsewhere. Now that he is finished with EMC, he is no longer okay with the agreement.
Imagine, for the sake of analogy, that you find a residence in California that you like even more than your current leased condo in Boston, Massachusetts where you have lived the past twenty years. You contact your Massachusetts landlord and announce that you have moved to California where (for the sake of our analogy) the state does not recognize lease agreements. You then file suit in California Superior Court to break the lease which expires in 12 months, on the grounds that the lease “decreases your residential mobility”. This raises several questions in my mind:
- Should any State’s law supercede the law of the State in which an agreement was ratified?
- Should we be allowed to game the system by changing venues to suit our goals?
- Do we believe we have a right to break agreements without repercussions/penalties when they are no longer in our interest?
- Should parties not be held responsible and accountable for the terms of their reciprocal agreements? Why should a non-compete be any less enforceable than other agreements and social contracts?
- Should we trust individuals who clearly believe agreements are made to be broken at their convenience?
- What does this tell us about ourselves, our character and the value of contracts if we condone this sort of behavior?
There was a time when a man’s word was his bond, a handshake was his contract. Those days seem distant now. We live in a society that preaches the values of truth, honesty, and personal integrity, but puts them into practice at its convenience. Contracts, it seems, are only sometimes worth more than the paper on which they are written.
Disclaimer: This is not a personal attack on Mr. Donatelli, nor is it a criticism of EMC or HP. My beliefs apply to everyone, and my views are not necessarily shared by my fellow analysts here at DMG.
