Question: A friend of mine (for real, not me) received an offer letter from two tech firms in Silicon Valley. Let's called one X and the other Y.

X's offer letter has a better salary and sign-on bonus. However, my friend prefers to go to Y. Y is willing to match X's salary and sign-on bonus, but wants proof in the form of the offer letter. However, X's offer letter is marked "confidential". My friend did not sign an NDA before going in for an interview.

Under these circumstances,

1. Can my friend share X's offer letter with Y?
2. Does there have to be an NDA signed with X before the offer letter is considered actually confidential?

Answer: 
Confidential does not have any legal weight in most places without a formal agreement. You can't just send someone something and mark it confidential.

But handing it over would be a breach of the company (that actually has given an offer) expectations. And there is no guarantee that the other company will better the offer, they have just 'said' they will.

Generally they shouldn't be asking and you shouldn't be giving. Personally I wouldn't, it's a sign of weakness to acquiesce in a negotiation regarding a matter where your honesty is questioned by demanding proof. And if word got out you share documents given in good faith, that's a terrible reputation to have.
Salary negotiation can be summarized as follows:

“We’re willing to pay you x.”

“I’d be willing to accept x+2.”

“We’ll only go as high as x+1”

All the reasoning and justifications that go in between only serve to fill gaps in an otherwise very uncomfortable exchange. The idea of needing proof of some extraneous details about other prospects is ridiculous, imho. As some of the other answers have suggested, they probably didn’t believe you when you mentioned your other offer and they think they can call your bluff and get you to accept less.

I would think whether or not you actually produce a piece of paper with a number on it is likely irrelevant. What they want to know is “can we get a better deal?” And you can tell them the answer is no without having to share confidential documents.

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> I’m afraid I’m not at liberty to share official correspondence from [company x] but I give you my full assurance that the offer is real.
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