Client Alert

Global Handcuffs and Claw-Backs: Getting Tough With Cross-Border Loyalty Protections

September 22, 2008

Mark Poerio, Erika Collins and Christopher Walter

Tough markets tend to sharpen loyalty issues, as employers compete for an edge that can come from better knowledge, customer contacts or even trade secrets. Luring the best executive talent is the most direct route to an edge. Reflecting employer concern, a 2008 survey by TalentKeepers, Inc. finds that 81 percent of American business executives consider employee retention a top priority -- a staggering jump from the 41 percent in 2007. Smart compensation structures can provide "gold" that encourages long-term loyalty (hence the term golden handcuff). The potential to recoup cash bonuses and stock awards from disloyal or corrupt employees can give rise to a "claw-back" threat for enforcing loyalty and key business protections.

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