Apple founder Steve Jobs and Google CEO Eric Schmidt appear to have secretly cooperated to drive down the salaries of tech workers by agreeing not to recruit each other’s staff, according to emails uncovered by a class action lawsuit filed in federal court in California.
Pando Daily has an excellent deep dive on the suit, which has been going on for years.
What’s most shocking about the emails is how unambiguous they appear to be, according to the ruling allowing the case to proceed. Jobs and Schmidt exchanged emails to ensure the pact was enforced, and Jobs threatened “war” if he caught Google breaking it by wooing Apple workers over to Google.
Apple, Google and the other companies named in the suit have been fighting the litigation, and many of the emails have been aired before. But the new ruling gathers the emails together in such a way that the scale of the alleged cartel — and the way it was supervised personally by tech’s top executives — is breathtaking. Google has previously insisted that it aggressively pursues talent. Apple has mostly declined comment on the debate. The company did not immediately respond to our request for comment.
In early 2005, Jobs emailed Google founder Sergey Brin, threatening him to stay away from recruiting Apple’s Safari web browser team:
if you [Brin] hire a single one of these people that means war.
Then in 2007, when Jobs learned that a Google recruiter had contacted an Apple employee, he forwarded the email to Schmidt with this message:
I would be very pleased if your recruiting department would stop doing this.
The recruiter was fired an hour later, Pando reports.
In fact, as the agreement stretched over years, Apple supposedly had an internal “hands off list” and Google a “Do Not Cold Call” list that recruiters used to make sure that “war” did not break out between the companies.
Tech worker salaries in Silicon Valley quickly rise into the six-figure range. The suit, filed by the U.S. Department of Justice, covers 100,000 tech workers and alleges their salaries were depressed by a total of $US9 billion in the 2000s.
The suit alleges that Schmidt knew what he was doing was illegal, Pando reports:
Later that year, Schmidt instructed his Sr VP for Business Operation Shona Brown to keep the pact a secret and only share information “verbally, since I don’t want to create a paper trail over which we can be sued later?”
The suit covers these alleged secret agreements between Apple, Google, Intel, and Adobe and is scheduled for trial in May.
If CEOs broke the pact, even accidentally, they were apparently subjected to one of Jobs’ fits of rage. At one point, Jobs allegedly caught Adobe trying to pinch low-level Apple workers, and Adobe CEO Bruce Chizen told Jobs he thought the pact applied only to senior level staff:
I thought we agreed not to recruit any senior level employees…. I would propose we keep it that way. Open to discuss. It would be good to agree.
Here’s Jobs’ reply:
OK, I’ll tell our recruiters they are free to approach any Adobe employee who is not a Sr. Director or VP. Am I understanding your position correctly?
Chizen caved immediately:
I’d rather agree NOT to actively solicit any employee from either company ….. If you are in agreement, I will let my folks know.
Adobe instantly adopted the do-not-recruit policy.
What’s galling about the emails is that they come from executives who, on any other day, praise the wonders of the free market, competition, and its ability to set fair prices. Yet in private, when it comes to their own companies, they avoid competing for staff and pursue policies that artificially distort the market to ensure that their most valuable assets — the people who actually create the products that generate Apple and Google’s returns — get paid as little as possible.
The suit claims the movie studios Lucasfilm and the Jobs-run Pixar were part of the same cartel. The ruling describes why Lucas felt the need to stunt competition in the labour market, which went back as far as the 1980s:
George Lucas believed that companies should not compete against each other for employees, because ‘[i]t’s not normal industrial competitive situation.’ As George Lucas explained, ‘I always — the rule we had, or the rule that I put down for everybody,’ was that ‘we cannot get into a bidding war with other companies because we don’t have the margins for that sort of thing.’