[batmaniam]

I don't think it's fear, ego, or whatever other answers here have suggested. It's pure profit motivated. If employees knew things were going to hell, would they keep working or start looking for new jobs? The latter case has a higher chance to make the ship sink faster as employees leave, features would be put on hold, client obligations may go unfulfilled, and ultimately leading to loss of profit/revenue. That would not look good to shareholders, and to the golden handcuffs that may be hovering over VP heads when they also get laid off (they have metrics they are judged on too, you know).

That's why we hear so many stories of startups suddenly going bankrupt, leaving the grunt employees going, "huh"? They want to keep everyone on-board, working 100% efficiency, so that the elites at the top can reap everything before things go to crap.

That's pretty much it. All other reasons don't make sense when you include the entire hierarchy of a corporate structure and the goal of any company (it's money).

That's why telling the truth is so hard, because it affects the company's bottom line, whereas your life being inconvenienced doesn't. So companies just lie, or stay quiet until they have to tell the truth last minute.

[mywittyname]

Employees always know what's going on. You can't hide the truth from the people who directly experience it every day. And these people talk.

I'm always amazed when managers feel the need to keep upbeat and "dispel the rumors" to the exact people who started the "rumors." Even as a developer, I have excellent insight into customers. I remember working for a company whose product usage fell off of a cliff. I certainly noticed how loads on our servers fell long before the sales team got additional training to combat the falling renewal rates or before the layoffs hit.