Tuesday, April 8, 2014

Top Silicon Valley Companies in Wage Fixing Scandal (2014)

Apple Inc. logo (left) "shaking hands" with Google logo (right)

In early 2005, as demand for Silicon Valley engineers began booming, Google and Apple have been involved in an illegal agreement with dozens of other technology firms to keep their employees’ wages low, according to court documents filed in the United States. Confidential internal emails allegedly reveal how the companies artificially kept control of their wage bills by agreeing not to recruit each other’s employees and push their salaries upwards. On February 27, 2005, Bill Campbell, a member of Apple’s board of directors and senior advisor to Google, emailed Jobs to confirm that Eric Schmidt “got directly involved and firmly stopped all efforts to recruit anyone from Apple.” 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?”
What is “wage-fixing”? It’s like price-fixing. It’s technically illegal for companies to collude to hold prices artificially high; that’s called interfering with the “free market” and with buyers’ right to bargain with multiple vendors for lower prices. When companies do this, when they act like a “cartel,” they can be prosecuted, at least technically. Wage-fixing is the same thing; it’s when companies in an industry agree to keep wages artificially low, to eliminate workers’ right to force employers to compete for their services.
The Obama Administration first exposed these secret conversations and agreements between some of the biggest names in Silicon Valley in a Department of Justice antitrust investigation launched in 2010. That DOJ suit became the basis of a class action lawsuit filed on behalf of over 100,000 tech employees whose wages were artificially lowered — an estimated $9 billion effectively stolen by the high-flying companies from their workers to pad company earnings — in the second half of the 2000s. At the end of January, the 9th Circuit Court of Appeals denied attempts by Apple, Google, Intel, and Adobe to have the lawsuit tossed, and gave final approval for the class action suit to go forward. A jury trial date has been set for May 27 in San Jose. According to court documents obtained by the Silicon Valley website Pando Daily ahead of the case, dozens of other technology firms including companies ranging from Dell, IBM, Ebay and Microsoft, to Comcast, Clear Channel, Dreamworks – and potentially more than a million of their employees – were implicated in the scheme.

Bill Campbell, member of Apple's board of directors

Theory of individualism says that the only goal of business is to profit, so the only obligation that the businessperson has is to maximize profit for the owner or the stockholders. (Salazar) Since we don't know yet the court's decision, we can't say that this whole action was illegal. You can look at this case through different perspectives. In short run, is more profitable to save money by paying less to your employees and in addition you have some kind of insurance that your main competitors wont try to recruit your employees. However in long run, in this case, when your employees will find out what is going on, they probably will sue you and your business, which will create some problems and damage to the reputation. You will face troubles finding new employees, which may affect productivity. That is exactly what happened in this case.

The definition of utilitarianism theory is happiness or pleasure is the only things of intrinsic value. This illegal wage fixing agreement does not follow this ethical theory because employees are getting paid less than they have to, which makes them unhappy and unsatisfied. Just by performing utilitarian cost-benefit analysis, we can assume overall happiness is pretty low for this price. More than million employees were underpaid and their rights were abused just to make couple hundreds people happy, that’s just ridiculous.

"Special Agreement Hiring Policy" created by Google for parent companies

According to Kantianism, “You should act rationally – don’t act inconsistently in your own actions or consider yourself exempt from rules. Also, allow and help people to make rational decisions. Next, respect people, their autonomy, and individual needs and differences. Lastly, you should be motivated by Good Will, seeking to do what is right because it is right,” (Salazar) Silicon Valley bosses definitely acted inconsistently. They also tried to hide this agreement - “verbally, since I don’t want to create a paper trail over which we can be sued later?” which means they were manipulating their employees rather than let them make rational decisions. They were motivated to fulfill their ego, rather than by good will, they acted without any respect towards their employees, their will and individual needs. Employees had no chance to stand against huge corporations, you either agree to work for them and get underpaid or you don’t have a job at all.

Virtue Theory
The last ethical theory is the Virtue Theory, which is based on the four primary virtues, which are “courage, honesty, temperance, and justice" (Salazar). Courage is defined as risk-taking and willingness to take a stand for the right ideas and actions, honesty stands for honesty in agreements, hiring and treatment of employees, customers and other companies. Temperance is “reasonable expectations and desires” (Soloman 34) and Justice is hard work, quality products, good ideas, and fair practices. Illegal wage-fixing agreement between major Silicon Valley CEO’s violates all 4 virtues. It is unfair and dishonorable agreement, it does not stand up for right ideas or fair practices. The idea behind this agreement is very wrong, it makes employees vulnerable, either if they decide to leave their company or they decide to stay and get underpaid.

Stempel, Jonathan. "Silicon Valley Workers May Pursue Collusion Case as Group- Court." Reuters. Thomson Reuters, 14 Jan. 2014. Web. 08 Apr. 2014.

"Steve Jobs Threatened Palm's CEO, Plainly and Directly, Court Documents Reveal." PandoDaily Steve Jobs Threatened Palms CEO Plainly and Directly Court Documents Reveal Comments. N.p., n.d. Web. 08 Apr. 2014.

"Tech Giants Lose round in Wage-fixing Suit." CNET. N.p., n.d. Web. 08 Apr. 2014.

"The Techtopus: How Silicon Valley’s Most Celebrated CEOs Conspired to Drive down 100,000 Tech Engineers’ Wages." PandoDaily The Techtopus How Silicon Valleys Most Celebrated CEOs Conspired to Drive down 100000 Tech Engineers Wages Comments. N.p., n.d. Web. 08 Apr. 2014.

Heather Salazar "An introduction to a business ethics" lectures

"UPDATED: Google Begged Steve Jobs for Permission to Hire Engineers for Its New Paris Office. Guess What Happened Next…." PandoDaily UPDATED Google Begged Steve Jobs for Permission to Hire Engineers for Its New Paris Office Guess What Happened next Comments. N.p., n.d. Web. 08 Apr. 2014.

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