Owning a piece of the competition

November 9, 2005 9:56 AM

In general, what are the legalities in owning stock in a major competitor of one's employer?
posted by mischief to work & money (4 comments total)

Generally, an employer may restrict the stock holdings of employees when access to inside information is involved, i.e., law and accounting firms often (but not always) prohibit their employees from owning stock in the firm's clients, or senior-level employees are restricted to trading windows for buying/selling company stock. I'm not certain that I understand what the rationale would be for prohibiting one's employees from owning stock in a competitor. Furthermore, people often move from one company to a competitor, and retain stock they may have acquired while working in the first, so it's not at all unusual for an employee to own stock in a competitor.

Whether it's a good idea from a portfolio diversification perspective is a different matter, but worth taking into account.

So there's no law against it, but if you are an at-will employee, and if your employer views owning stock in a competitor as somehow disloyal, well, you may be out of a job.
posted by ambrosia at 10:13 AM on November 9, 2005

At my company, we have to declare the ownership to our "business ethics" officer and they make decisions on a case-by-case basis. The law isn't involved at my level (since I'm not an executive), but the suits at headquarters probably wouldn't like it.
posted by cmonkey at 10:26 AM on November 9, 2005

Here is one common one:

A financial interest is improper if your job, the amount of your investment, or the particular company in which you invested could--when viewed objectively by another person--influence your actions as an employee.

In the case of a supplier, if you have anything to do, either directly or indirectly, in deciding whether [your company] does business with that company, you should not have any financial interest at all in the company.

posted by smackfu at 11:17 AM on November 9, 2005

For most people who get stock or stock options in their own company, their holdings in their own company will so far outweigh their holdings in a competitor that there really should be no issue, but I think smackfu basically has it right.
posted by caddis at 1:34 PM on November 9, 2005