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Executive's new job limited by non-compete agreement, P.2

In our last post, we noted that Boston Scientific Corp., a major manufacturer of medical devices, has hired a senior executive who formerly headed up the medical devices and diagnostics division of its arch rival, Johnson & Johnson (J&J).

His new role will initially be limited, however, by a non-compete clause contained in his employment contract with his former employer. In exchange for being allowed to hire the J&J executive, Michael Mahoney, Boston Scientific acceded to J&J's demands that it not allow him to become its chief executive officer (CEO) until November 1 of next year. It also agreed to bar him until that date from playing a supervisory role over any businesses that are directly competitive with J&J.

Instead, he will immediately assume the role of President of Boston Scientific, voiding the company's prior intentions to make him CEO by the end of this year. After J&J, in response to learning of these plans, pointed to the non-compete portion of Mahoney's contract, Boston Scientific also agreed to use its chief counsel to oversee compliance with an agreement limiting Mahoney's immediate role.

The two companies have previously battled for market share in the medical devices field. Both companies have marketed devices used for treatment of clogged arteries, known as stents. J&J has decided to stop marketing stents, however. J&J and Boston Scientific also clashed over which of them could acquire Guidant Corp., a manufacturer of defibrillators that can be implanted in patients. Boston Scientific outbid J&J on Guidant, buying it for $28.4 billion.

The agreement between J&J and Boston Scientific was described as unusual, as was the announcement that Mahoney's taking the reins as Boston Scientific's CEO would be delayed for over a year. Usually, newly hired CEOs assume their positions immediately.

Source: Wall Street Journal, "J&J Puts Squeeze on Rival's Hiring," Joann S. Lublin and Jonathan D. Rockoff, Sep 17, 2011.

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