Tech Firms May Find No-Poaching Pacts Costly
The New York Times
By ANDREW ROSS SORKIN
Apple CEO Steve Jobs, left, and Google CEO Eric Schmidt, right, smile as
they introduce the iPhone during Jobs' keynote address at MacWorld
Conference & Expo in San Francisco, Tuesday, Jan. 9, 2007. (AP
Photo/Paul Sakuma)
It is the talk of the Valley.
A high-stakes negotiation is
taking place in Silicon Valley among some of
the biggest names in the industry — Apple and Google among them — over
accusations that they were involved in a collusion to prevent their employees
from being hired at rival companies. The employees filed a class-action suit,
contending that the illegal hiring practices cost employees $9 billion in lost
wages. Now the companies are locked in mediation sessions, hoping to settle the
case in the next several weeks.
The question being whispered all
over town now is how much will Apple, Google, Intel and Adobe ultimately have
to pay?
The companies privately scoff at
the $9 billion figure that the plaintiffs are seeking, contending it amounts to
extortion. The employees, who number about 100,000, suggest that the facts are
so damning against the companies — and so embarrassing — that they won’t settle
for anything less than a blindingly high number.
Indeed, the evidence against the
firms, which already settled a Justice Department complaint in 2010 without
paying any fine, appears to be about as one-sided as you can imagine.
Steve Jobs, the chief
executive of Apple at the time,
could not have been any clearer of his intentions to collude with Google and prevent his company from
hiring away employees from his frenemy and vice versa.
“If you hire a single one of these
people that means war,” he told a Google executive.
Apple’s human resources sent out a
note:
“Please add Google to your
’hands-off’ list. We recently agreed not to recruit from one another so if you
hear of any recruiting they are doing against us, please be sure to let me
know.”
A trove of similar emails has
emerged in the case, many of which have been unearthed and highlighted by Mark
Ames of PandoDaily, who has diligently followed the case.
Google’s chief executive, Eric Schmidt, was just as explicit in
an email after Mr. Jobs queried him about why Google was trying to hire one of
his employees. “I believe we have a policy of no recruiting from Apple and this
is a direct inbound request,” Mr. Schmidt wrote to his team. “Can you get this
stopped and let me know why this is happening? I will need to send a response
back to Apple quickly so please let me know as soon as you can.”
Mr. Schmidt clearly understood the
legal jeopardy such an arrangement could create. In another similar email chain
about the policy with another technology company that was ostensibly part of
the no-hire cartel, he told a colleague to communicate it “verbally since I
don’t want to create a paper trail over which we can be sued later.”
Well, here we are.
How deep was the no-hire policy?
When Google sought to hire an Apple employee based in Paris, Google literally sought permission
from Mr. Jobs first. “Google would like to make an offer to Jean-Marie Hullot
to run a small engineering center in Paris.
Bill, Larry, Sergey and Jean-Marie believe it is important to get your blessing
before moving forward with this offer,” a Google vice president wrote to Mr.
Jobs. “Google’s relationship with Apple is extremely important to us. If that
relationship is any way threatened by this hire, please let me know and we will
pass on this opportunity.”
Mr. Jobs later objected and Google
rescinded the offer to Mr. Hullot’s team. “Steve is opposed to Google hiring
these engineers,” the vice president wrote. “He didn’t say why, and I don’t
think it is appropriate for me to go back for clarification. I can’t risk our
relationship with Apple to make this happen over his objections.”
All of this does raise a
reasonable question: Is it ever appropriate to agree with a “partner” company
not to poach an employee?
Some lawyers I surveyed on the
subject, most of whom refused to comment on the record because they work at one
of the dozens of firms involved in the Silicon Valley case, said that it might
be permissible for a company to decide against poaching an employee of a
business partner in a specific instance — even if it was just about keeping
good relations with the company — but that a blanket ban on hiring as part of
systemic strategy would be plainly anticompetitive.
Some defense lawyers argued that
as long as there was not a reciprocal stated arrangement, companies had wide
latitude about their hiring practices.
“The alleged do-not-cold-call
agreements between Google, Apple, Intel and Intuit did not reflect ‘parallel’
conduct from which to infer a conspiracy, as plaintiffs contend,” Google said
in a motion.
But the executives involved at the
highest levels of the no-hiring cabal appear to have known it was illegal, or
at least in a substantially gray area.
“We have nothing signed,” Paul Otellini, the chief executive of Intel, told a colleague about the
agreement he reached with Mr. Schmidt of Google. “We have a handshake ‘no
recruit’ between Eric and myself. I would not like this broadly known.”
Sheryl Sandberg, the
chief operating officer of Facebook and a former Google employee, said in a
court filing, “Google agreed, at Intuit’s request, to not solicit the Intuit
employees who would be involved in the discussions and/or the potential
partnership.”
Of course, it may be hard to
sympathize with the engineers in Silicon Valley,
who are often paid mid-six-figure compensation packages, if not more.
So how to determine how much was
truly lost by this no-hiring collusion?
That’s hard to determine. If the
case ever gets to trial next month in San Jose — which is looking increasingly
less likely because the companies are deep in settlement talks — it is possible
that both sides will present a series of economic experts to estimate the
damages. But at $9 billion, that would mean that each of the 100,000 employees
was owed $90,000.
That’s a lot of money. It is hard
to believe the settlement will be that high. In a town that mints billionaires,
though, whatever the number is, it will be the equivalent of a rounding error.
Paul Otellini
Paul
S. Otellini was the president & CEO for the Intel Corporation, a member of the President's Council on Jobs and Competitiveness, is a steering
committee member for the Partners for a
New Beginning, and a director at Google
Inc.
Note: Sheryl K.
Sandberg was a member of the President's
Council on Jobs and Competitiveness, the VP for Google Inc., and a trustee at the Brookings Institution (think tank).
Penny S. Pritzker
was a member of the President's Council
on Jobs and Competitiveness, the national finance chair, fundraiser for the
2008 Barack Obama presidential campaign,
a co-chair for the 2009 Barack Obama
inaugural committee, a fundraiser, national co-chair for the 2012 Barack Obama presidential campaign,
a contributor for the 2013 Barack Obama
inaugural committee, the host for the Barack
Obama fund-raising dinner, 7/2/2008, is the secretary of the U.S. Department of Commerce for the Barack Obama administration, and a member
of the Commercial Club of Chicago.
Steve
Case was a member of the President's
Council on Jobs and Competitiveness, and married to Jean N. Case.
Jean
N. Case is married to Steve Case,
a steering committee member for the Partners
for a New Beginning, and a Partners for a New Beginning steering committee
member for the Aspen Institute (think
tank).
Madeleine K.
Albright is the chair for the Partners
for a New Beginning, and a trustee at the Aspen Institute (think tank).
James S.
Crown is a trustee at the Aspen Institute (think tank), and a member
of the Commercial Club of Chicago.
Lester Crown
is a member of the Commercial Club of Chicago, and was a lifetime
trustee at the Aspen Institute (think tank).
L.
John Doerr is trustee at the Aspen Institute (think tank), and a
director at Google Inc.
Foundation
to Promote Open Society was a funder for the Brookings Institution (think tank), the Aspen Institute (think
tank), the New America Foundation,
and the Climate Reality Project.
George Soros
was the chairman for the Foundation to Promote Open Society.
Walter
Isaacson is the president & CEO for the Aspen Institute (think tank),
the vice chair for the Partners for a
New Beginning, and the writer for Steve
Jobs (2011 autobiography).
Steve
Jobs authorized Walter Isaacson
to write his biography, was the co-founder & chairman for Apple Inc., and married to Laurene Powell Jobs.
Laurene Powell
Jobs was married to Steve Jobs,
and a director at the New America
Foundation.
Helene
D. Gayle is a director at the New
America Foundation, and a steering committee member for the Partners for a New Beginning.
Eric E. Schmidt is the chairman of the New
America Foundation (think
tank), the chairman for Google
Inc., was a funder for the New America Foundation (think tank),
a director at Apple Inc., and a 2008 Bilderberg conference
participant (think tank).
Bruce
Sewell is the general counsel & SVP for Apple Inc., and was the general counsel for the
Intel Corporation.
Paul
S. Otellini was the president & CEO for the Intel Corporation, a member of the President's Council on Jobs and Competitiveness, is a steering
committee member for the Partners for a
New Beginning, and a director at Google
Inc.
Albert
A. Gore Jr. is a senior adviser for Google
Inc., the chairman for the Climate
Reality Project, a director at Apple
Inc., and a partner at Kleiner
Perkins Caufield & Byers.
E.
Floyd Kvamme was the EVP for Apple
Inc., and is a partner emeritus at Kleiner
Perkins Caufield & Byers.
John
L. Hennessy is a director at Google
Inc., and an investor in Kleiner
Perkins Caufield & Byers.
Kleiner
Perkins Caufield & Byers is an investor in Google Inc.
Wilmer
Cutler Pickering Hale and Dorr was the lobby firm for Google Inc.
Cameron F. Kerry
was an associate at Wilmer Cutler
Pickering Hale and Dorr, a general counsel; acting secretary for the U.S. Department of Commerce, is John F. Kerry’s brother, and a fellow
at the Brookings Institution (think
tank).
Sheryl K.
Sandberg was a trustee at the Brookings
Institution (think tank), the VP for Google
Inc., and a member of the President's
Council on Jobs and Competitiveness.
Akin,
Gump, Strauss, Hauer & Feld, LLP was the lobby firm for Google Inc.
Vernon E. Jordan Jr. is a senior
counsel for Akin, Gump, Strauss, Hauer
& Feld, LLP, an honorary trustee at the Brookings Institution (think
tank), Valerie B. Jarrett’s
great uncle, a director at the American Friends of Bilderberg (think
tank), and a 2008 Bilderberg conference participant (think tank).
Cyrus F.
Freidheim Jr. is an honorary trustee at the Brookings Institution (think tank), and a member of the Commercial Club of Chicago.
Valerie B. Jarrett
is Vernon E. Jordan Jr’s great niece, the senior
adviser for the Barack Obama
administration, and a member of the Commercial
Club of Chicago.
Penny S. Pritzker
is a member of the Commercial Club of
Chicago, the secretary of the U.S.
Department of Commerce for the Barack
Obama administration, was a member of the President's Council on Jobs and Competitiveness, the national
finance chair, fundraiser for the 2008
Barack Obama presidential campaign, a co-chair for the 2009 Barack Obama inaugural committee, a fundraiser, national
co-chair for the 2012 Barack Obama
presidential campaign, a contributor for the 2013 Barack Obama inaugural committee, the host for the Barack Obama fund-raising dinner, 7/2/2008.
Cameron F. Kerry
was a general counsel; acting secretary for the U.S. Department of Commerce, an associate at Wilmer Cutler Pickering Hale and Dorr, is John F. Kerry’s brother, and a fellow at the Brookings Institution (think tank).
Wilmer
Cutler Pickering Hale and Dorr was the lobby firm for Google Inc.
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