Private Firms Poaching Talent From Rival Public Firms (WFC, UBS, JEF)

The phenomenon of poaching talent from competitor companies seems to be making a comeback. Some firms are taking up the opportunity to hire employees from companies who are still recovering from the global recession. These firms are hiring star performers, who are frustrated with their company’s ongoing recessionary compensation policies.

This sort of poaching is largely seen in the financial services sector. However, other sectors like technology, entertainment and marketing are not far behind. Public firms are undergoing a lot of scrutiny on their compensation packages and policy and hence the employees feel frustrated to work at lower salaries. It has thus become easy for private companies to hire these frustrated employees, as these companies still enjoy the freedom of designing their own compensation packages, without government or any other external interference.

Robert W. Baird & Co., a small Milwaukee-based investment bank, hired 70 executives for posts ranging from the director to senior vice president level during 2009, many from rivals. Another example is that of Baird. Baird lured an executive from Wells Fargo & Co. (NYSE: WFC) as it could provide a lot of independence to this experienced executive. Baird also hired an executive from Morgan Stanley Smith Barney to be the CEO of its biggest business, private wealth management.

If we look at another sector, the story is similar. Ashley Morris, chief executive of Capriotti's Sandwich Shop Inc, has hired Patrick Walls as the new chief operating officer. Patrick Walls was a chief franchise officer and 12-year veteran of McAlister’s Deli, which has 290 restaurants in the U.S. He was attracted by the work independence and growth opportunities provided at Capriotti.

Capriotti is growing with more than 50 company-owned and franchise locations in eight states across the U.S. However, such poaching has triggered legal nerves. Many companies during the recession made their employees sign non compete agreements, which legally bars the employees from switching to other companies.

To give an example, last year, investment bank UBS AG (NYSE: UBS) sued rival Jefferies & Co, (NYSE: JEF), accusing it of having poached three dozen members from its global health-care investment banking arm. UBS also sued Benjamin Lorello, former head of UBS's health-care group, and former UBS managing director Sage Kelly, accusing them of breaking their employment contracts. UBS has received settlements against this and the case has now been resolved.