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December 8, 2000

Beware the golden handcuffs

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As most of you already know, competition for high-tech talent is at an all-time high. Companies are finding it more and more important to retain the talent they have since it is so difficult and costly to attract new talent. This has led many companies to increase both the quality and variety of incentives to keep employees from "jumping ship." While this can lead to some amazing opportunities, it can also reduce your career options and lock you into a company you would rather leave.

Of options, vesting and company cars

So just what are "golden handcuffs" and what is the problem with wearing a pair? In most cases "golden handcuffs" are any incentive a company provides to keep you with them. This can include anything from stock options to a company car to a promised sabbatical after 7 years. Whatever the incentive, it is always important to clearly evaluate it with an eye towards how it effects your ability to do what is best for your career.

Stock options are one of the most popular incentives used in high-tech industries today. These options allow you to purchase company stock, usually for a much reduced price if you stay with a company for a given number of years or "vesting" period. As people are learning, though, stock options may be worthless by the time you can exercise them, especially in volatile startup companies. Still, the promise of future rewards can keep you at a company longer than prudent as you try to force a way to make those stock options pay off. This is not wise since you always want to make sure that you are doing what is best for your career, not what is best for you stock options or your company.

While stock options have been the most popular incentive in the past, here are other incentives, though, which are a bit more worrisome to any career minded individual. I came across a recent article about a company that was providing no cost/low cost loans to their employees in order to increase employee retention. In my mind, though, there was one troubling aspect to the plan. The article stated that should the employee leave the company while the loan was still in effect, the entire balance of the loan would come due on their resignation or termination. If an employee was in the situation of needing a $50,000 loan to purchase a house in the first place, it seems to me that the "calling in" of this loan could be an undue hardship on the employee. Would the employee be able to move the loan to another lender? Would the employee have to declare bankruptcy? The possibility of abuse in this situation seems outrageous and definitely contrary to managing your own career.

One nightmare scenario might work this way. Your boss comes to you and says you must work 18 hour days or he will fire you. He knows you can't repay the company loan so you have no choice but to work or possibly lose your home and everything else. While this is an extreme example it is still a possibility.

Money flows to you not away

The most important part when evaluating an incentive is your liability should you decide to leave the company. In the case of stock options, you forfeit the right to exercise those options but there is no additional financial burden. If you are being offered a company car will you have to assume the remainder of the lease should you leave the company or merely return the car. You might like driving a new Lexus, but paying for it yourself is another story. Finally, if you are considering a loan from the company what controls are in place to prevent the company from using the loan to exert undue pressure upon you. You certainly don't want to find yourself in the position of virtual servitude just because you can't afford to pay back a loan. There should be written policies stating how such issues as terminations and resignations effect the loan. Overall, any incentive that can require you to pay, if and when you leave, should be avoided at all costs. The threat to your career decision-making process is too high.

Whatever the incentive, you must carefully evaluate its effect on your ability to manage your career. While it might be nice to have stock options, a fancy car or a nice house, if an incentive limits your ability to make important career decisions it can end up having a negative effect on your career as a whole. Incentives should be designed to entice you into staying with a company, not chaining you to your desk with a pair of golden handcuffs.

about this column.

Douglas E. Welch is a freelance writer and computer consultant in Van Nuys, California. Readers can discuss career issues with other readers by joining the Career Opportunities Discussion on Douglas' web page at: http://www.welchwrite.com/dewelch/ce/

He can reached via email at douglas@welchwrite.com