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Massachusetts Governor Announces Plan to Abolish Noncompetes

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Re: Massachusetts Governor Announces Plan to Abolish Noncompetes

#51

Post by bm1362 »

danvoell wrote: post #42

For sales people I see a value in non-competes. I own a company which can run successfully with 100 clients. If I hire a sales person who builds good enough relationships with 50 of our existing clients such that he takes them to another company, he could cut our revenue in half. Why is that supposed to make me want to set up my business in Massachusetts? This announcement would seem to make businesses less competiti…

If a sales person is keeping around 50% of your business, you should provide incentive for them to stay- right?

Re: Massachusetts Governor Announces Plan to Abolish Noncompetes

#52

Post by nickff »

dragonwriter wrote: post #41
GFK_of_xmaspast wrote: post #12

Earlier quoted context omitted.

Non-competes are very much pro-business, in that they weaken the power of labor.

"pro-capital" isn't necessarily the same thing as "pro-business"; non-competes, in particular, reduce labor market mobility, which reduces overall market efficiency in the same way that barriers to capital market liquidity would.

Though I have never, and will never sign one of these agreements, I cannot agree with your statement that they "reduce[] overall market efficiency". First off, such a grand claim merits some citation of empirical or theoretical evidence. Secondly, there are a variety of ways that these agreements (which I do not support) may increase productivity, such as by increasing the employer's trust in the employee, allowing the latter to access confidential documents, and increasing the average period of employment, thereby giving the employee more time to accrue experience and improve productivity in a specific field and/or application.

Re: Massachusetts Governor Announces Plan to Abolish Noncompetes

#53

Post by danvoell »

chris_mahan wrote: post #46
danvoell wrote: post #42

For sales people I see a value in non-competes. I own a company which can run successfully with 100 clients. If I hire a sales person who builds good enough relationships with 50 of our existing clients such that he takes them to another company, he could cut our revenue in half. Why is that supposed to make me want to set up my business in Massachusetts? This announcement would seem to make businesses less competiti…

If those 50 clients would be better served getting a different product from a different vendor, then why would you want to stop that? If your product is superior in value, the salesman won't be able to move the customers away from your products. Make better products. Anyway, you'll attract better salesmen.

I don't want to deny consumers from the ability to choose. This concept theoretically makes business entities weaker and employees stronger. In practice I presume that this concept would force business owners to provide less information to employees if such information could be used against them in the future. So is the employee actually stronger?

Re: Massachusetts Governor Announces Plan to Abolish Noncompetes

#54

Post by smackfu »

khuey wrote: post #40
smackfu wrote: post #25

Earlier quoted context omitted.

If wonder if companies with mandatory non-competes have lower salaries. They should.

You would expect them to have higher salaries, to compensate employees for the risk of being prohibited from working for N months after their employment terminates.

Higher initial salaries perhaps, but lower annual increases, since employees don't have as many jobs to switch to so there is less incentive for raises.

Re: Massachusetts Governor Announces Plan to Abolish Noncompetes

#55

Post by rz2k »

_delirium wrote: post #34
rz2k wrote: post #28

Earlier quoted context omitted.

And, if understood in that way, it is an instance where the term "pro-business" is a political ideology rather than an economic perspective. Historically the rationale for pro-business policies is that greater production creates more wealth for everyone in a society. As a result it could be argued that a labor union might hurt an economy if less output comes from the same input, while those labor unions' arguments wo…

Historically the rationale for pro-business policies is that greater production creates more wealth for everyone in a society. I don't think that's really true, in a realpolitik sense if you look into why different interest groups were advocating for "pro-business" policies at various points in various countries' histories. Historically the rationale for "pro-business" policies has most often been that they increase…

I think that you are right when it comes to something like a negotiation between a business and a labor union. Both sides simply view it as an adversarial process, much like how lawyers represent their clients and presume the system will work it out from there as long as they are relatively honest.

However, while it may often require some credulousness, I think a significant majority of people sincerely believe that their political positions make the world a better a place rather than just their own lot in life.

There are honest discussions that can be had about most policy decisions. For instance, it might be difficult to sell your software business, if you can't legally promise not to immediately launch a competing product. And yet, most of the serious policy mistakes of the past few decades have been made in the wake of debates involving two sets of competing soundbites—a problem that could be improved by better economic education starting at a younger age if I'm right that people are generally motivated to improve the world.

Re: Massachusetts Governor Announces Plan to Abolish Noncompetes

#56

Post by larrys »

chris_mahan wrote: post #46
danvoell wrote: post #42

For sales people I see a value in non-competes. I own a company which can run successfully with 100 clients. If I hire a sales person who builds good enough relationships with 50 of our existing clients such that he takes them to another company, he could cut our revenue in half. Why is that supposed to make me want to set up my business in Massachusetts? This announcement would seem to make businesses less competiti…

If those 50 clients would be better served getting a different product from a different vendor, then why would you want to stop that? If your product is superior in value, the salesman won't be able to move the customers away from your products. Make better products. Anyway, you'll attract better salesmen.

"If those 50 clients would be better served getting a different product from a different vendor, then why would you want to stop that?"

Because you need to earn a living for one thing. And you won't keep your job for long as another reason (see strategic cases below because there are exceptions of course).

Anyway along those lines would you suggest that a salesman for jet engines for Boeing not take an order and simply tell the client that a Rolls Royce engine is a better fit for the application? (And yes I know that there are strategic cases where it can build loyalty by doing this and/or if the stakes aren't to large you can try to be helpful.).

So in other words the salesman's job is to, at the expense of the survival of his own company, to simply help the client (on his employer's dime) make the best decision and as a result he will still be able to earn a living because everything will just work out? And of course his competitors are doing the same thing, right?

Re: Massachusetts Governor Announces Plan to Abolish Noncompetes

#57

Post by nickff »

ghaff wrote: post #39
smackfu wrote: post #25

Earlier quoted context omitted.

If wonder if companies with mandatory non-competes have lower salaries. They should.

Economic theory would suggest so. I suspect that, adjusting for everything else, it's a pretty small effect. Would be an interesting study though. I wonder if there's one there. [EDIT: Duh. I misread the original post. Of course, the salary should be higher not lower to compensate for such a restriction--though I still suspect it would be small.]

What economic theory would suggest this? This non-compete appears to be an option, and would be priced as such.[1] I would guess that purchasing any additional assurance from an employee would cost the employer(s) more, perhaps in the form of salary, severance, or a signing bonus.

[1] http://en.wikipedia.org/wiki/Valuation_of_options

Re: Massachusetts Governor Announces Plan to Abolish Noncompetes

#59

Post by hga »

danvoell wrote: post #42

For sales people I see a value in non-competes. I own a company which can run successfully with 100 clients. If I hire a sales person who builds good enough relationships with 50 of our existing clients such that he takes them to another company, he could cut our revenue in half. Why is that supposed to make me want to set up my business in Massachusetts? This announcement would seem to make businesses less competiti…

I might be inclined to agree, but doesn't the wild success of so many California companies where even these non-competes are unenforceable suggest the net value isn't high, maybe even negative?

Massachusetts has had one modern era wildly successful civilian high tech period, stretching from the minicomputer era to the early PC era (both Visicalc and Lotus 1-2-3 were done in the Boston area). But this part of its high tech scene died hard by 1990 (and I left the area, I was an eyewitness starting in 1979); non-competes were I believe part of the problem with Silicon Valley wildly out-competing the Boston area.

Since then I've heard things got better in the web era, but still nothing compared to the Bay Area.

Re: Massachusetts Governor Announces Plan to Abolish Noncompetes

#60

Post by joshjdr »

Massachusetts is already pretty easy-going in terms of enforcing non-competes, leaning to benefit individual rights. I live and work in Mass, and have been on both ends of non-competes. At my shop we have all employees sign a non-disclosure agreement and assignment of invention, but we stop at the non-compete. Personally I think it's unreasonable to try to regulate a person's right to earn, and it seems like the way things are headed. I am unsure about the argument whether or not this is pro-labor or pro-business. As far as I am concerned this is pro-free market which is pro-everybody in the long run. Maybe a few big co's with deep pockets can't flex legal like they would have previously, but is that such a bad thing?
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