I Dont Want to Create a Paper Trail: Inside the Secret Apple-Google Pact ::posted Wed, 19 Feb 2014 11:00:05 +0000:: ift.tt/O8KmkG Whether waxing poetic about net neutrality or defending the merits of outsourcing, Silicon Valley execs love to talk about how a free market breeds innovation. So it might come as a surprise that some of those execs were engaged in a secret pact not to recruit one anothers employees—in other words, to game the labor market. The potentially illegal deals suppressed salaries across the sector by a whopping $3 billion, claims a class-action lawsuit scheduled for a May trial in San Jose, and were done to juice the bottom lines of some of the nations most profitable companies. Documents filed in conjunction with the litigation, first reported last month by PandoDailys Mark Ames, offer a fascinating behind-the-scenes glimpse of interactions among the likes of Apples Steve Jobs, Googles Eric Schmidt, and Intuit Chairman Bill Campbell. In early 2005, the documents show, Campbell brokered an anti-recruitment pact between Jobs and Schmidt, confirming to Jobs in an email that Schmidt got directly involved and firmly stopped all efforts to recruit anyone from Apple. On the day of that email, Apples head of human resources ordered her staff to please add Google to your hands off list. Likewise, Googles recruiting director was asked to create a formal Do Not Cold Call List of companies with which it had special agreements not to compete for employees. A few months later, Schmidt instructed a fellow exec not to discuss the no-call list other than verbally, he wrote in an email, since I dont want to create a paper trail over which we can be sued later? Eric Schmidt Google Good luck with that. The no poaching policies, as they were known among senior-level executives at companies such as Adobe, Intel, Intuit, and Pixar, were first exposed by a 2010 antitrust lawsuit filed by the Department of Justice. The DOJ complaint is the basis for the current class action, which was filed in 2011 by the San Francisco law firm Lieff Cabraser Heimann & Bernstein, alleging that some 64,000 tech workers were harmed. The case, interestingly, has garnered little attention outside of the tech world. Sure, the average middle-class worker probably wont shed a tear for the most likely victim here: Silicon Valley code jockeys and junior execs banking six-figure salaries and perhaps million-dollar stock options. The Bay Area, after all, is recently ablaze with animosity over tech-fueled gentrification and income inequality. And yet the collusion of CEOs to artificially suppress high-end salaries speaks to an economic malaise that affects every working stiff: The widening gap between the rich and poor isnt some accident of free-market capitalism, but the product of a system that puts corporate leaders and their shareholders ahead of everyone else. The lawsuit describes the rapid spread of anti-recruitment pacts between 2004 and 2007—arrangements perhaps facilitated by the overlap on Silicon Valleys corporate boards: Jobs, who became Disneys largest shareholder after it bought Pixar, served on Disneys board until his death in 2011. Schmidt sat on Apples board until 2009, and Intuits Campbell (a former Schmidt adviser) still does. Intel CEO Paul Otellini has held a seat on Googles board since 2004. Such close ties have long been seen as a problem for shareholders, but the nonrecruitment pacts suggest that such cozy relationships could harm workers, too. Steve Jobs, according to unsealed court documents obtained by Mother Jones, was a leading advocate and enforcer of the nonrecruitment pacts. Two months after entering into the agreement with Google, he emailed Bruce Chizen, then Adobes CEO, complaining that Adobe was poaching Apple employees. Chizens reply, that he thought theyd agreed only to avoid senior level employees, didnt satisfy Jobs. OK, Ill tell our recruiters that they are free to approach any Adobe employee who is not Sr. Director or VP, he shot back. Am I understanding your position correctly? Steve Jobs Acaben Chizen responded that he would rather the arrangement apply to all employees: The next day, Adobes vice president of human resources announced to her recruiting team that Bruce and Steve Jobs have an agreement that we not solicit ANY Apple employees, and vice versa. In one instance not yet reported, Jobs allegedly played hardball with a reluctant CEO. In mid-2007, he called Edward Colligan, then president and CEO of Palm, to propose an arrangement between Palm and Apple by which neither company would hire the others employees, Colligan testified in a sworn deposition. When he refused, citing the deals possible illegality, Jobs threatened to sue Palm for patent infringement. Im sure you realize the asymmetry in financial resources of our respective companies… he wrote Colligan in a follow-up email. My advice is to take a look at your patent portfolio before you make a final decision here. The Valleys hush-hush wage-control policies have been in play at least since the 1980s, soon after Jobs bought Lucasfilms computer graphics division and renamed it Pixar. As George Lucas later put it in a deposition, firms in the digital-filmmaking realm could not get into a bidding war with other companies because we dont have the margins for that sort of thing. Lucas and Pixars then-president, Edward Catmull, made the following agreement, according to the lawsuit: (1) not to cold call each others employees; (2) to notify each other when making an offer to an employee of the other company even if that employee applied for a job on his or her own initiative; and (3) that any offer would be final and would not be improved in response to a counter-offer by the employees current employer (whether Lucasfilm or Pixar). George Lucas redtouchmedia/flickr After its purchase by Disney in 2006, Pixar made the same gentlemans agreement with Apple, according to unsealed emails from the lawsuit. (Last year, Pixar, Lucasfilm, and Intuit settled their part of the class-action lawsuit for an undisclosed sum in a deal that allows the affected employees to file anonymous claims.) In its earlier antitrust suit, the DOJ argued that the Valleys no-poaching agreements were patently illegal—clear violations of the Sherman Antitrust Acts ban on restraining interstate commerce. In 2011, without admitting fault or paying fines, Google, Apple, and four other tech firms settled with the DOJ and agreed to discontinue their anti-competitive behavior. Representatives for Apple and Google declined to comment for this story, but Google argued at the time that its pacts hadnt hurt workers. Theres no evidence that our policy hindered hiring or affected wages, a Google attorney wrote on the companys public-policy blog. But we abandoned our no cold calling policy in late 2009 once the Justice Department raised concerns, and are happy to continue with this approach as part of the settlement. Whether and how the pacts truly affected wages is at the heart of the ongoing suit, which is slated for trial May 27. The defendant firms insist that their employees salaries werent widely suppressed because they were based on a pay for performance model. That is, workers got raises based on their accomplishments, not on what their coworkers earned. Continue Reading » [Forwarded by the MyLeftBlogosphere news engine. Link to original post below:]
Posted on: Wed, 19 Feb 2014 21:08:19 +0000
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