The Ethics Coach on Exit Strategy Etiquette
Join us at Entrepreneur magazine's Growth Conference, Dec. 15 in Long Beach, Calif. for a day of fresh ideas, business mentoring and networking. Register here for exclusive pricing, available only for a limited time.
Q: My contract with our salespeople says that if they make a sale but leave the company before the deal closes, they are not paid the commission. Is this policy ethical?
A: I don't think it is ethical or a good business strategy. The best way to attract talented people is to make it known that you treat staffers--current and former--fairly. Prospective customers sense when salespeople are upbeat about what they are selling. You may not be able to hold on to salespeople who get offers you can't match, but if they leave saying good things to their network about you and the company, your reputation grows exponentially. As you review your policy, consider taking the long-term view of the business and reputation you are building--the ROI for paying people what they've earned.
Q: I'm going to start a commercial cleaning business and need references to pitch client prospects. However, the only experience I have is through the cleaning company where I currently work. Is it unethical to ask one of my employer's clients for a reference?
A: The cleanest way to get references for your new business is by lining up a few small jobs on your own time and with your own equipment (if necessary, rent what you need). You may have to offer a discount, but the reference will reflect your style, approach and results.
Your work for your employer's clients reflects your work ethic, but it also reflects the standards of how your employer does business, because they can take credit for the people they hire. How you leave this job will have an impact on your reputation as a new business owner, and no matter what you intend, asking your employer's clients for a reference can look like you are trying to poach.
One more bit of advice: When you give your notice, do everything possible to leave on good terms--your employer may be willing to outsource overflow jobs to get you started.
Q: I invited a female friend to be a majority partner in my online learning business so we could benefit from being female-owned. We set up an LLC and operating agreement, but then things went bad. We had so many disagreements that she closed the business, rolled it into one she owns on her own and refuses to give me equity. Do you agree that her actions were unethical?
A: If your main motivation for taking on your partner was her gender, and you didn't really consider her skills or whether or not you had a shared purpose, it's easy to see how the situation spiraled out of control. It does sound like there was some unethical behavior, but you describe a partnership that became all toxic and no trust--likely on both sides. Without her take on where things went wrong, judging her ethics seems unfair. Unethical, even.
Friends shouldn't become business partners without proof that they share the same values and can work together. If the friendship hasn't been tested, and trust and respect haven't been earned, there is no basis for understanding the other person's capacity for ethical behavior.
One of the great things about entrepreneurs is that they are resilient, analyzing what didn't work and incorporating what they've learned into making the next idea fly. I wish you well in creating solid footing with partners the next time. To help with that, I checked in with an expert to find out what you should do to keep things from going off the rails again.
"It is much easier to resolve issues at the outset, when partners are getting along, than to wait until an actual dispute arises," says Richard Mandel, associate professor of law at Babson College. Before moving ahead with a partnership in the future, meet with an attorney to discuss (and put into writing) the following: owners' share of profits and losses, voting power, job descriptions, expectations, compensation, noncompetition, disposition of equity and method of valuation, as well as how to make provisions self-executing so you don't need to go to court to enforce them.