Non-Compete Puts Damper on Boston Sci’s Hiring

Michael Mahoney will assume the role of Boston Scientific president next month, but he can't supervise competing businesses or become CEO until November 2012 because of a non-compete agreement with Johnson & Johnson.

Johnson & Johnson (J&J) is enforcing a non-compete agreement with recently departed executive Michael Mahoney-and it has created unusual employment terms between Mahoney and Boston Scientific Corporation, which recently selected him as its new leader.

According to Natick, Massachusetts-based Boston Scientific-which employs about 5,000 in Minnesota-Mahoney will assume the role of president on October 17. But J&J and Boston Scientific reached an agreement under which Mahoney can't supervise competing businesses or become CEO until November 2012.

Citing “people familiar with the matter,” The Wall Street Journal reported that Boston Scientific's general counsel will personally monitor the compliance of that agreement and that J&J is prepared to sue if Mahoney violates the ban. One of those same unnamed individuals said that Boston Scientific's original plan was to make Mahoney CEO by the end of 2011, but the company dropped that idea when J&J brought up the non-compete issue.

A Boston Scientific spokeswoman told The Wall Street Journal that the company discussed “various organizational and timing options with J&J” before reaching an agreement but insisted that it never planned to name Mahoney CEO at the end of this year.

Boston Scientific and New Brunswick, New Jersey-based J&J are competitors that have long fought over market share for some products. But legal experts say that it's unusual for an incoming CEO-to-be to become entangled in a non-compete dispute and even less common for a new leader to accept a lesser role temporarily, The Wall Street Journal reported.

Current Boston Scientific President and CEO Ray Elliott will retire from his posts at year's end. Hank Kucheman-executive vice president and group president of the cardiology, rhythm, and vascular group-will serve as interim CEO until Mahoney moves into the role late next year.

To read more in The Wall Street Journal about Mahoney's non-compete and how it will affect his new position at Boston Scientific, click here.