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As part of the follow-up to their hurried removal of Monica Cellio from her moderator position at six different Stack Exchange communities, Stack Overflow, Inc. has committed to "releas[ing] an official process around removing moderators." I strongly recommend that as expeditiously as this new moderator-removal process is developed, a parallel process for reinstating moderators is developed as well, to be released as one policy.
When it comes to regular users, the established process allows moderators to suspend their privileges through suspension, which comes with a built-in sunset. At the end of a finite period, the user's privileges are automatically restored. The presumption is that the suspension period will provide the user a chance to reconsider whatever behavior triggered the suspension and commit to changing it. There is also a mechanism for permanently deleting a user account, but that is only meant to be used to remove active users in extreme cases of ongoing abuse.
When it comes to moderators, it makes sense for the processes for removing and re-instating privileges to be different, but it seems that starting similarly with a temporary suspension "to cool down" and work out issues would be similarly helpful. Had such a measure been invoked in the present case, I suspect that a resolution could have been worked out with much less public visibility, and with almost none of the cataclysmic upset across the Stack Exchange network that firing Monica as a first move brought on.
Short of an automatic sunset, there ought to at least be a clear path for manual reinstatement, paralleling the path for removal. Whatever communications between SOI staff and the moderator in question are required to lead up to removal, parallel communications should be structured to lead up to reinstatement. Whatever due consideration is required within the SOI team before a moderator is removed, parallel due consideration should be applied toward that moderator's reinstatement.
The institutional memory, technical and personal skills, and subject-matter expertise that moderators build up in the course of doing their jobs makes them too valuable as volunteers to simply give up on with the finality that a removal process without a parallel reinstatement process suggests.
Finally, although the firing of Monica followed no clear procedure, provided for no clear expectations by Monica or her communities, and did not allow for time for due communications or consideration, I recommend that a path be created for Monica to return to her positions, with clear expectations for a fair process, implemented with integrity by all involved. One of the benefits we may find at the end of that path is partial healing from the present crisis.