Ethics in Business Negotiations and in Leadership: How Collusion Limits Value Creating Opportunities

It started with Steve Jobs. That’s the story told by the flood of e-mail messages subpoenaed in a class-action lawsuit filed against Apple, Google, Intel, and Adobe by 64,613 Silicon Valley software engineers who claim that the companies conspired to keep them from switching employers.

Back in February 2005, in an internal e-mail, Google cofounder Sergey Brin wrote that Jobs (then Apple’s CEO, now deceased) had repeatedly warned him that if he hired particular employees away from Apple, it would mean “war.” A month later, the two companies allegedly reached an informal agreement not to recruit from each other, according to court documents obtained by technology publication PandoDaily. E-mail messages show that after Google made a job offer to a Paris- based Apple employee, for example, it ran the offer by Jobs. After Jobs objected, Google rescinded the offer.

The anti-poaching pact eventually expanded to almost 30 firms, including Adobe, Intel, Intuit, Pixar, and Lucasfilm, and spread beyond Silicon Valley to the Ogilvy advertising agency and British media giant NTL, according to the news website AppleInsider.

Ethics in Business: Under-the-Table Negotiated Agreements

Reciprocal hiring bans are illegal in the United States because they artificially suppress wages, competition, and innovation. In 2010, following a U.S. Department of Justice investigation, several Silicon Valley firms agreed to refrain from collusion in their hiring practices.

Some executives say they resisted threats and pressure from Jobs and others. Soon after Sheryl Sandberg left Google to become Facebook’s chief operating officer, for instance, Google executive Jonathan Rosenberg asked her to promise that she would “substantially lower the rate at which you hire people from us,” Reuters reports. Sandberg refused.

At least some executives seem to have believed that the alleged pact was illegal but proceeded with it anyway. In one e-mail, for example, Google CEO Eric Schmidt instructed a colleague to communicate about the policy “verbally since I don’t want to create a paper trail over which we can be sued later,” according to the New York Times.

The employees in the class-action suit maintained that a pact among the four companies being sued resulted in their losing up to $3 billion in wages. The companies, for their part, argued that any hiring bans were never formal and thus did not amount to a conspiracy. The two sides engaged in mediation in the hopes of staying out of court. On April 24, they reportedly settled for about $300 million, widely viewed as a bargain deal for the tech companies.

Ethics in Business: When Negotiation Ethics Fade

The pact, if it did exist, undermines the ethical aspirations of many Silicon Valley firms, as epitomized by Google’s unofficial “Don’t be evil” motto.

Our ethical breaches in negotiation and other business tasks are often unintentional, write Max H. Bazerman and Ann E. Tenbrunsel in their book Blind Spots: Why We Fail to Do What’s Right and What to Do about It (Princeton University Press, 2011). Through the process of ethical fading, we often scrub the moral dimensions of our decisions from our minds. It is not hard to imagine, for example, how Brin and other Google executives may have framed an antipoaching pact first and foremost as a personnel issue rather than an ethical one, especially in light of a significant threat from Jobs.

How can we ensure that we adhere to our moral values during negotiations? Bazerman and Tenbrunsel have several suggestions:

1. Take your time.

Research shows that we behave more ethically when we deliberate carefully rather than deciding under pressure.

2. Focus on abstract principles.

Look beyond short-term payoffs to consider the values and principles you’d like to guide your decisions— and reconsider them throughout your negotiations.

3. Cultivate alternatives.

We’re less susceptible to threats that would compromise our ethics when we have the power to walk away from a negotiation. Improve your likelihood of standing by your values by developing strong alternatives to the current deal.

Originally published in the July 2014 issue of Negotiation Briefings.