Ethical dilemma submitted by: David Unger
David Unger Asks:
The worst situation of employee theft was one in which a “departing” salesperson took the company’s database of advertising clients which they planned to use to compete with our business. Of course they really don’t teach you this at Wharton. What do you do?
Rabbi Rosen Answers:
In business school, as in so many advanced professional degree programs, it’s hard to prepare a student for the ethical dilemmas and moral ambiguities presented on the ground in “real” life. Unfortunately, your question is easy to address because it is an ancient problem. The Talmud and its commentaries discuss this exact scenario, in which a person has invested time and capital to establish regular, reliable clientele whom a competitor specifically targets for conversion. In such a case, the competitor is prohibited from encroaching on the business of the established vendor by poaching clients. Using proprietary lists for this purpose is a blatant violation of this Jewish principle and is prohibited by our Torah.
The Torah encourages healthy, vibrant competition, especially when the consumer benefits from better prices or higher quality goods and services. Naturally, there is freedom for a competitor to publicly advertise his or her alternative business and lure clientele from an established firm with sales, discounts, and promotions. This open form of competition is generally permitted according to the Torah.
However, in narrower markets, smaller sales territories, or stormier business climates, where the competing entrepreneurs cannot both succeed, the Torah insists that direct competition for specific clients be limited in the interest of maintaining the established business. Even today, Jews who abide by these moral guidelines litigate these matters with arbitration in rabbinical courts, which issue injunctions and directives regarding offending competitors or firms.
In your case, you also have a fiduciary obligation to your business partners and investors to protect the investment you made in growing your client base. You must also avoid demoralizing your employees and incentivizing future defections by making an example of this theft. Therefore, you should to avail yourself of whichever legal channels are available to freeze the ability of the “departing salesperson” to act on his stolen data.