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There are two types of compensation.
The loss of a free agent can - under certain Collective Bargaining rules - result in an extra draft pick for the team that lost the free agent and the team that signed him losing one. The CBA rules can be selected in the Game Set-up screens at any time.
But the one that kq76 was running into was the second kind of compensation pick. When the draftee fails to sign with the drafting team. The team that failed to sign him isn't out of luck, but rather, gets a pick to make up for it in the next draft. There is no setting I am aware of to stop that second form of compensation. It's a given and probably necessary in real life and so is locked into in the game.
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