I probably shouldn't have said "the one thing" - I totally agree that I think it is a silly policy and not the right to be doing at all.
I guess I meant "the one thing that bothers me from the perspective of someone who might be fired at any moment" :) - I could survive in a fire fast iff they were open about everything, although I probably wouldn't choose to work there in the first place, if that makes sense.
Beyond that it creates a morale problem. People who work together form social attachments and get upset when a coworker disappears. People who are in no actual danger of being fired will assume they're next. People who make mistakes or miss deadlines will start looking for new jobs because job-hunting is easier when you have a job. And good people will start to leave because it's just not a fun place to work with the black cloud hanging over the office.
That is not to say you should never fire someone. Sometimes it's unavoidable. But it's not something you should do lightly.