A Letter to John Siracusa or: Why Executives Are Never Fired
by Michael Camilleri
I’m taking your advice that if I have a comment in response to something you’ve said on your podcast Hypercritical, the best thing to do is to write a blog post about it so that other people can read it and benefit from it.
In the latest episode, you discussed, among other things, Scott Forstall’s departure from Apple, his role as an ‘advisor’ and why people at a certain pay grade are never ‘fired’ as such. I’ve seen a number of people wonder in particular about the decision to keep Forstall on as an advisor and think I have some experience that may be able to shed light on this.
As background, up until the beginning of this year, I worked for a law firm in Australia where one of the things I did was prepare employment contracts, occasionally at the executive level. Obviously the laws in Australia and the United States are not exactly the same but I think the similarities are enough that I can explain what’s going on here.
First, in respect of the role of advisor. Executive level contracts will typically have ‘gardening leave’ provisions that allow a company to continue employing an executive but prevent him or her from coming into the office. During gardening leave, the employee continues drawing a salary but is otherwise cut off from the company. You typically want to do this with fired executives because they will have detailed knowledge about the plans of the company (at least up until the point of firing) and the longer the executive is on gardening leave, the staler this knowledge becomes and the less useful it is to a competitor. Gardening leave provisions are usually included in addition to employment restraints that seek to restrict an executive from going to work for a competitor (or confidentiality agreements that try to achieve the same goal) but as these can often be very difficult to enforce (particularly in California), at least ensuring that the fired employee is out of action for the gardening leave period means that they don’t know everything the company is planning on doing.
Given Forstall’s position in Apple, particularly with respect to iOS, I am sure that this is a huge concern for Apple. As a result, I would expect Forstall to have exactly zero input in the direction of the company. He’s being called an advisor to be polite but I very much doubt he and Tim Cook will speak until the gardening leave period expires. (Speaking of which, we don’t have any information about how long this period would be. Dan suggested that it’d be up as soon as the clock strikes midnight on New Year’s Eve but I would think Apple would want to keep Forstall on the payroll for as long as they possibly can.)
The next point was about the reasons why a company rarely, if ever, admits an executive was fired. I’m not knowledgeable enough about Californian law to know for sure but my guess is that this has nothing to do with respect for the former employee and everything to do with fear of being sued. A statement that a person was fired could be considered defamatory/libellous depending on what was said and the circumstances in which it was said. Of course, this is true for any announcement of a firing but the reason it’s not usually an issue with junior level employees is because: a) they’re less likely to have the resources to sue; b) even if they did sue, it would be difficult for them to prove there was much damage to their reputation since they probably don’t have much of a reputation to be damaged. For executives, particularly at Forstall’s level of visibility, it is far easier for the company to simply say they’re moving on.
Hope that helps clear up a few things and thanks again (to Dan as well!) for producing such an enjoyable programme.