The Edge

Silicon Valley firms are facing a rise in anger from a new source: Their own employees

Key Points
  • Tech employees at top Silicon Valley firms Google, Amazon, Microsoft and have been waging protest campaigns that are political in nature, even though the private workplace does not afford free-speech rights.
  • Technology workers have lashed out at contracts their firms have won from both the military and law enforcement for drone AI and facial recognition software, as well as work for government agencies, like ICE.
  • Results have been mixed, but employment and leadership experts say the balance between employer and employee in Silicon Valley may be permanently changed.

In late June, employees at completed a task that's becoming common in Silicon Valley.

They protested.

Thousands of tech workers from top companies, including Google, Amazon and Microsoft, have recently led large-scale internal rebellions against their employers. The wave of employee outrage is largely over the use of companies’ technology in controversial government contracts — from facial recognition software sold to law enforcement, to drone technology for the military and work with U.S. Immigration and Customs Enforcement.

More than a thousand Google employees marched in protest on Jan. 30, 2017, against the Trump administration's immigration ban.
Harriet Taylor | CNBC

For an industry with a history of outsized CEOs making bold, unilateral decisions, the recent employee uprisings show how much Silicon Valley and its top executives are being forced to adapt to a changing era.

Historically, tech employees have rarely challenged executives on ethical grounds. Employee loyalty is also enforced by a thick layer of nondisclosure agreements. Dissenting tech workers can voice concerns and opinions, but in doing so are simultaneously at the risk of termination. There is no free speech in the private workplace. At-will employment gives companies the power to fire employees for virtually any reason aside from discrimination.

But tech employees are increasingly finding that public attention on some subjects of gravity is an effective cudgel against the historical strength of corporate management. At Microsoft and Salesforce, employees protested the companies’ dealings with ICE after widespread outrage over the agency’s role in separating migrant families. Workers at Amazon challenged the e-commerce giant to stop selling its facial recognition software to the police departments over fears of misuse by law enforcement. Google’s employees were able to successfully coerce its management to abandon a controversial contract with the government, referred to as Project Maven. The project utilized Google’s AI technology to improve drone strikes in the battlefield.

“I think this is an example of the power dynamic shifting,” said Davida Perry, co-founder and partner at Schwartz Perry & Heller, which focuses on employment law. Citing the internal Microsoft protests over the detention of immigrant children at the border, Perry said, “Employees will be supported by a wave of national outrage over what’s going on at the border. If Microsoft were to let them all go, there would be an outcry from the public."

Github coders urge Microsoft to break ties with US immigration department
Github coders urge Microsoft to break ties with US immigration department

One reason tech employees are able to push the risk of termination relates to their skills. Top Silicon Valley firms are engaged in an intense competition for employees.

“These tech companies are all extremely dependent on scarce talent,” said James Baron, professor at Yale School of Management. “It would not serve companies well that are struggling mightily to attract top talent, to engage in actions that would antagonize employees and have them feel that their ability to express themselves would be forfeited upon their employment there. Other employers that are less dependent on top talent might be able to get away with a hard-line stance,” Baron said.

Results — short of avoiding termination — have been mixed for tech employees. Google is the only major tech firm to cede to employee demands over a contract. Executives from Microsoft and Salesforce sidestepped the employee calls to drop ICE contracts: The companies argued that the software contracted to ICE was not involved in the agency’s policy at the U.S.–Mexico border. As an alternative, Salesforce opted to donate $1 million to help families affected by the Trump administration’s policy.

"We’re proud of our employees for being passionate and vocal and will continue the conversation on this and other important matters," a Salesforce spokeswoman told CNBC.

It would not serve companies well that are struggling mightily to attract top talent, to engage in actions that would antagonize employees and have them feel that their ability to express themselves would be forfeited upon their employment there.
James Baron
professor at Yale School of Management

Microsoft publicly released an email its CEO Satya Nadella sent out to employees on LinkedIn, which played down the company’s involvement with ICE as “supporting legacy mail, calendar, messaging and document management workloads,” but not the agency’s controversial detention policy.

Amazon refused to cede to employee demands over facial recognition software pilot programs with the two police departments, but the Orlando Police Department has decided to drop the software program. During the furor, Amazon Web Services defended its motives in a statement to the press that said, "Our quality of life would be much worse today if we outlawed new technology because some people could choose to abuse the technology."

Late last month facial recognition technology was used to identify the shooter in the attack on the Capital Gazette newspaper in Maryland.

Trump's role in shifting tech leadership landscape

The movement by tech employees to challenge their own executives has been building from a more general protest ethos in the Trump era. Shortly after President Donald Trump came into office and implemented his controversial travel ban, many Silicon Valley workers, including Google workers, joined mass protests. A broad coalition of tech companies, including Apple, Facebook, Google, Microsoft and Tesla — 130 tech companies in all — not only voiced opposition to the travel ban in public statements but filed a legal brief in the U.S. Court of Appeals supporting opposition to it.

Jeffrey Sonnenfeld, senior associate dean for executive programs at Yale School of Management and founder and president of The Yale Chief Executive Leadership Institute, said Google executives made the right decision with Project Maven. He doesn't view CEOs who cede to an employee protest as having forfeited their leadership status, even if it seems counterintuitive. Sonnenfeld said the model at the top is changing quickly, and CEOs who listen and abide by employees' complaints are being seen as stronger leaders.

He pointed to a recent milestone moment when CEOs rebelled against the highest leadership office. “August 2017 was the first time in the nation’s history that CEOs have declined the call of service from the Commander in Chief,” Sonnenfeld said, referring to a cascade of CEO resignations from a business advisory council to Trump that followed the president’s remarks on neo-Nazis and white supremacists. “How can they stand as a leader if they don’t stand behind the values they profess?" And that same privilege should cascade down the firm. "These employees are not slaves, and they’re not soldiers,” he said.

A Harris Poll Reputation Quotient released this week revealed an increase in the percentage of Americans who hold a positive view of CEOs. Nearly one-third of Americans, 32 percent, say today’s CEOs have a “very good reputation,” up from 25 percent last year, according to the poll. In addition, Americans who believe that CEOs have a “very bad reputation" dropped from 50 percent in 2017 to 43 percent this year. Researchers concluded that company and executive reputation is newly “built around ideals, a new moral authority — equal parts capitalist and activist.”

The government contracts in question have so far been inconsequential to these cash-rich growing companies’ balance sheet. For example, Google’s contract with the military for Project Maven was reportedly only a sliver of its $110 billion in annual revenue — $9 million. Until there is much more shareholder money at stake, a decision like Google's won't be difficult to make on financial grounds.

"We maintain an ongoing dialogue both within our company and with outside stakeholders about how best to act," a Microsoft spokesman said.

According to Sonnenfeld, it has never been only about money for Silicon Valley companies, and shareholders need to adapt to the new environment — or invest elsewhere.

“Anybody who invested in these companies who harbored the misconception that these companies will do anything for money should quickly sell their stock and buy into a tobacco company," he said. "That’s not what these companies stood for from the beginning. They stood for values beyond the quickest short-term buck that can be made.”