Many Americans voluntarily place their names on a “do not call” list to prevent unsolicited telemarketing calls. But a conspiracy among high-tech employers in Silicon Valley led to soft- ware engineers being placed on a “do not cold call” list without their knowledge, a situation that potentially held down their compensation. In reality, the list didn’t prevent telemarketers from calling—it actually prevented recruiters from calling to offer them potentially better jobs in the industry. It seems that to stabilize compensation and limit turnover of high-skilled employees, many prominent high-tech companies such as Apple, Google, Pixar, and Intel agreed to restrict poaching from each other. The companies shared the names of their employees with each other and placed them on the restricted list. Some agreements went so far as to ban hiring employees who had, on their own, applied for work at a rival firm. These secret agreements were widely instituted to eliminate salary “bidding wars” among the companies. Employees receiving job offers from a rival tech firm could use that as leverage to request a pay increase with the cur- rent employer. And rivals might be able to learn about another company’s pay practices by inter- viewing employees from the firm. The courts view this employer practice as a violation of antitrust legislation and a restraint of trade. Top-level managers have been implicated in the agreements. The companies involved were connected with each other because many executives had overlapping board seats on other defendants’ boards and worked closely with each other. While antitrust lawsuits usually involve the pricing and sale of products or services, it is important to remember that the labor market and compensation are also governed by these regulations. Companies are therefore forewarned that limiting employees’ pay and opportunities to freely move in the job market can be a dangerous and costly way to retain talented workers.59 Working together with competitors and other firms to limit free market adjustments to compensation is inappropriate. Based on these issues, consider the following questions:
1. How should companies address the possibility of bidding wars when trying to retain top talent? How should HR professionals or general managers help address this issue?
2. What compensation strategies would enable companies to attract and retain good employees without having to worry about bidding wars? How should the needs of employees be addressed in these strategies?