2009 Annual Report (PDF) - FTI Consulting

and experience necessary to manage a large organization. If one or more members of our management teamleaves and we cannot replace them with suitable candidates quickly, we could experience difficulty in managingour business properly. This could harm our business prospects, client relationships, employee morale andfinancial results.We may not have, or may choose not to pursue, legal recourse against professionals who leave our company toform or join competitors.Our professionals typically have close relationships with the clients they serve, based on their expertise andbonds of personal trust and confidence. Although our clients generally contract for services with us as acompany, and not with individual professionals, in the event that professionals leave, such clients may decidethat they prefer to continue working with a professional rather than with our company. Substantially all of ourwritten employment arrangements with our SMDs include non-competition and non-solicitation covenants.These restrictions have generally been drafted to comply with state “reasonableness” standards. However, statesgenerally interpret restrictions on competition narrowly and in favor of employees. Therefore, a state may holdcertain restrictions on competition to be unenforceable. In the case of employees outside of the U.S., we draftnon-competition provisions in an effort to comply with applicable foreign law. In the event an employee departsand acts in a way that we believe violates his or her non-competition or non-solicitation agreement, we willconsider any legal remedies we may have against such person on a case-by-case basis. We may decide thatpreserving cooperation and a professional relationship with the former employee or client, or other concerns,outweigh the benefits of any possible legal recourse. We may also decide that the likelihood of success does notjustify the costs of pursuing a legal remedy. Therefore, we may decide not to pursue legal action, even if it isavailable to us.Risks Related to Our Client RelationshipsIf we are unable to accept client engagements due to real or perceived relationship issues, our revenues,growth, client engagements and prospects may be negatively affected.Our inability to accept engagements from clients or prospective clients, represent multiple clients inconnection with the same or competitive engagements, and any requirement that we resign from clientengagements may negatively impact our revenues, growth and financial results. While we follow internalpractices to assess real and potential issues in the relationships between and among our clients, engagements,practices and professionals, such concerns cannot always be avoided. For example, we generally will notrepresent parties adverse to each other in the same matter. Under federal bankruptcy rules, we generally may notrepresent both a debtor and its creditors in the same proceeding, and we are required to notify the U.S. Trustee ofreal or potential conflicts. Even if we begin a bankruptcy-related engagement, the U.S. Trustee could find that weno longer meet the disinterestedness standard because of real or potential changes in our status as a disinterestedparty, and order us to resign, which could result in disgorgement of fees. Acquisitions may require us to resignfrom a current client engagement because of relationship issues that are not currently identifiable. In addition,businesses that we acquire or employees who join us may not be free to accept engagements they could haveaccepted prior to our acquisition or hire because of relationship issues.Claims involving our services could harm our overall professional reputation and our ability to compete andattract business and hire and retain qualified professionals.Our engagements involve matters that may result in a severe impact on a client’s business, cause the client asubstantial monetary loss or prevent the client from pursuing business opportunities. Our ability to attract newclients and generate new and repeat engagements depends upon our ability to maintain a high degree of clientsatisfaction as well as our reputation among industry professionals. As a result, any claims against us involvingthe quality of our services may be more damaging than similar claims against businesses in other industries.27