Reneging on an offer has always been costly to one’s reputation – now it can also be costly to one’s bottom line.
This week, a California judge ruled that a senior banker who reneged on a $10M job he’d accepted at Jeffries must now pay the firm $4M.
“Break-up fees,” traditionally paid when one party walks away from an M&A deal, are becoming an increasingly common component of job offers on Wall Street for more senior positions, in which the new hire agrees to pay a fee if they walk away from their accepted offer. The intent is to ensure new hires adhere to their commitments after what can be a long and costly search process. Whether or not they are effective is another story.
Our firm has seen candidates renege on a great job offer after accepting. Perhaps their employer dangled an enticing counteroffer, or perhaps an offer for their dream job surfaced after they’d already accepted the first job offer. It was likely not an easy decision for the candidate to make. However, it is a deeply frustrating and disappointing experience for our clients, who have invested time and energy into finding the right person to join their team. This is one of many reasons why we never push candidates to pursue an opportunity or accept an offer if they are unsure.
Regardless of break-up fees, reneging on a job offer has reputational costs and can put your career at risk – the investment world is a small one and news travels fast. Our recommendation is to think carefully before accepting a job offer, do your due diligence, and ask for more time to make your decision if needed.
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If you found this article interesting, you may also want to check out “Now is Not the Time to Accept a Counteroffer” and “Can You Renege on a Job Offer Once You’ve Accepted?”
