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The FTC's new enforcement weapon spells death for algorithms Forcing companies to delete algorithmic systems built with ill-gotten data could become a more routine approach. Illustration: CreepyCube/iStock/Getty Images Plus; Protocol Kate Kaye March 14, 2022 The Federal Trade Commission has struggled over the years to find ways to combat deceptive digital data practices using its limited set of enforcement options. Now, it's landed on one that could have a big impact on tech companies: algorithmic destruction. And as the agency gets more aggressive on tech by slowly introducing this new type of penalty, applying it in a settlement for the third time in three years could be the charm. In a March 4 settlement order, the agency demanded that WW International -- formerly known as Weight Watchers -- destroy the algorithms or AI models it built using personal information collected through its Kurbo healthy eating app from kids as young as 8 without parental permission. The agency also fined the company $1.5 million and ordered it to delete the illegally harvested data. When it comes to today's data-centric business models, algorithmic systems and the data used to build and train them are intellectual property, products that are core to how many companies operate and generate revenue. While in the past the FTC has required companies to disgorge ill-gotten monetary gains obtained through deceptive practices, forcing them to delete algorithmic systems built with ill-gotten data could become a more routine approach, one that modernizes FTC enforcement to directly affect how companies do business. A slow rollout The FTC first used the approach in 2019, amid scandalous headlines that exposed Facebook's privacy vulnerabilities and brought down political data and campaign consultancy Cambridge Analytica. The agency called on Cambridge Analytica to destroy the data it had gathered about Facebook users through deceptive means along with "information or work product, including any algorithms or equations" built using that data. It was another two years before algorithmic disgorgement came around again when the commission settled a case with photo-sharing app company Everalbum. The company was charged with using facial recognition in its Ever app to detect people's identities in images without allowing users to turn it off, and for using photos uploaded through the app to help build its facial recognition technology. In that case, the commission told Everalbum to destroy the photos, videos and facial and biometric data it gleaned from app users and to delete products built using it, including "any models or algorithms developed in whole or in part" using that data. Technically speaking, the term "algorithm" can cover any piece of code that can make a software application do a set of actions, said Krishna Gade, founder and CEO of AI monitoring software company Fiddler. When it comes to AI specifically, the term usually refers to an AI model or machine-learning model, he said. Clearing the way for algorithmic destruction inside the FTC It hasn't always been clear that the FTC might use algorithmic disgorgement more regularly. "Cambridge Analytica a was a good decision, but I wasn't certain that that was going to become a pattern," Pam Dixon, executive director of World Privacy Forum, said regarding the requirement for the company to delete its algorithmic models. Now, Dixon said, algorithmic disgorgement will likely become a standard enforcement mechanism, just like monetary fines. "This is definitely now to be expected whenever it is applicable or the right decision," she said. The winds inside the FTC seem to be shifting. "Commissioners have previously voted to allow data protection law violators to retain algorithms and technologies that derive much of their value from ill-gotten data," former FTC Commissioner Rohit Chopra, now director of the Consumer Financial Protection Bureau, wrote in a statement related to the Everalbum case. He said requiring the company to "forfeit the fruits of its deception" was "an important course correction." "If Ever meant a course correction, Kurbo means full speed ahead," said Jevan Hutson, associate at Hintze Law, a data privacy and security law firm. FTC Commissioner Rebecca Slaughter has been a vocal supporter of algorithmic destruction as a way to penalize companies for unfair and deceptive data practices. In a Yale Journal of Law and Technology article published last year, she and FTC lawyers Janice Kopec and Mohamad Batal highlighted it as a tool the FTC could use to foster economic and algorithmic justice. "The premise is simple: when companies collect data illegally, they should not be able to profit from either the data or any algorithm developed using it," they wrote. "The authority to seek this type of remedy comes from the Commission's power to order relief reasonably tailored to the violation of the law. This innovative enforcement approach should send a clear message to companies engaging in illicit data collection in order to train AI models: Not worth it." Indeed, some believe the threat to intellectual property value and tech product viability could make companies think twice about using data collected through unscrupulous means. "Big fines are the cost of doing business. Algorithmic disgorgement traced to illicit data collection/processing is an actual deterrent," David Carroll, an associate professor of media design at The New School's Parsons School of Design, said in a tweet. Carroll sued Cambridge Analytica in Europe to obtain his 2016 voter profile data from the now-defunct company. Forecast: Future privacy use When people sign up to use the Kurbo healthy eating app, they can choose a fruit or vegetable-themed avatar such as an artichoke, pea pod or pineapple. In exchange for health coaching and help tracking food intake and exercise, the app requires personal information about its users such as age, gender, height, weight and their food and exercise choices, which improve the app. In its case against WW, the FTC said that until late 2019, Kurbo users could sign up for the service either by indicating that they were a parent signing up for their child or that they were over the age of 13 and registering for themselves. The agency said the company failed to ensure that the people signing up were actually parents or adult guardians rather than kids pretending to be adults. It also said that from 2014 to 2019, hundreds of users who signed up for the app originally claiming they were over age 13 later changed their profile birth dates to indicate they were actually under 13, but continued to have access to the app. The fact that algorithmic disgorgement was used by the FTC in relation to one of the country's only existing federal privacy laws could be a sign that it will be used again, legal and policy experts said. While the Cambridge Analytica and Everalbum cases charged those companies for violating the FTC Act, the Kurbo case added an important wrinkle, alleging that WW violated both the FTC Act and Children's Online Privacy Protection Act. Both are important pieces of legislation under which the agency can bring consumer protection cases against businesses. "This means that for any organization that has collected data illegally under COPPA that data is at risk and the models built on top of it are at risk for disgorgement," Hutson said. The use of COPPA could be a foundational precedent paving the way for the FTC to require destruction of algorithmic models under future legislation, such as a would-be comprehensive federal privacy law. "It stands to reason it would be leveraged in any other arena where the FTC has enforcement authority under legislation," Hutson said. Application of algorithmic disgorgement in the COPPA context is "a clear jurisdiction and trigger of enforcement through a law that exists and explicitly protects kids' data, [so] if there was a corollary law for everyone it would allow the FTC to enforce in this way for companies that are not just gathering kids' data," said Ben Winters, a counsel for the Electronic Privacy Information Center. He added, "It shows it would be really great if we had a privacy law for everybody, in addition to kids." X [img] PROTOCOL CLIMATE Coverage | Newsletter | Intel | Events How tech is tackling climate change -- and reckoning with its own impact on the planet. Email Address [ ] Job Title (Optional) [ ] I also want to receive Protocol's daily tech newsletter, Source Code. [*] Climate [*] Newsletter [*] Sign Up URL [javascript:location.] Sign Up Now Your information will be used in accordance with our Privacy Policy Thank you for signing up. Please check your inbox to verify your email. Already registered? Click here to log in X Log in Email Address [ ] Sorry, something went wrong. Please try again. Email me an authentication link A login link has been emailed to you - please check your inbox. Don't have an account? Click here to register Kate Kaye Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data. ai data ftc privacy cryptocurrency Fintech Ukraine crypto leader: 'Blockchain will help rebuild my country' Kuna's Michael Chobanian spearheaded a relief effort that has raised more than $50 million in crypto donations. Michael Chobanian, founder of the Kuna Exchange and president of the Blockchain Association of Ukraine, told the Senate Banking Committee that his exchange has been able to turn donations into aid almost immediately. Screenshot: U.S. Senate Committee on Banking, Housing, and Urban Affairs March 17, 2022 Benjamin Pimentel Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429. March 17, 2022 A Ukrainian entrepreneur touted the role of crypto in helping the embattled country survive the Russian invasion, telling U.S. senators at a hearing Thursday that his exchange has been able to turn donations into aid almost immediately. Michael Chobanian, founder of the Kuna Exchange and president of the Blockchain Association of Ukraine, told the Senate Banking Committee that crypto sent to the relief campaign's wallet addresses was used to secure humanitarian aid shortly after it was received. His appearance highlighted a positive side of crypto after a long period where digital assets have mostly drawn criticism on Capitol Hill. The highlight on crypto's contributions to Ukraine relief could help shape lawmakers' views as Washington's focus on crypto regulation intensifies. "The minute the crypto landed on these addresses, the government could use them immediately," Chobanian said. "No bureaucracy. We spent that immediately the next day." The campaign has already raised more than $50 million, and is aiming to reach $100 million, Chobanian said. Chobanian noted that Ukrainian President Volodymyr Zelenskyy on Wednesday legalized crypto in the country. "I see that you are still discussing whether to ban or allow crypto in [the] U.S.," he said. "I invite all U.S. companies to come to Ukraine and open up there. You can use Ukraine as a sandbox." Crypto, he said, "will basically change the world." Blockchain "will be the technology that we're going to use to rebuild my country," Chobanian said. Keep Reading Show less Benjamin Pimentel Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429. russia-ukraine michael chobanian cryptocurrency sponsored content Sponsored Content Enabling the era of intelligent edge March 17, 2022 Rene Torres Rene Torres is currently the VP / General Manager of IOT Sales and Marketing Group at Intel Corporation. Rene has been with Intel for 20+ years having started in 1997. Rene has worked in multiple management roles including sales, marketing, product management, and platform application engineering for Intel Architecture and software solutions with a special focus on markets such as wireless communications infrastructure, networking and mobile client computing. Prior to his current role, Rene was the Director of Marketing & Platform Enabling for Software Defined Networking and Network Function Virtualization in the Data Center Group (DCG). Rene was also the chief of staff and technical assistant to Doug Davis, SVP and GM of the Internet of Things Group (IOTG). He has worked abroad under three expat assignments in Brazil, China and Germany. Rene has a BS in Business Administration from Pepperdine University and MBA in Global Management from the Thunderbird School of Global Management. March 3, 2022 In a few years, we may be largely living "on the edge." As the amount of data grows exponentially, there is a greater need for edge computing solutions to aid in real-time decision-making. Gartner predicts that by 2025, 75% of enterprise-generated data will be created and processed at the edge, outside of traditional centralized data centers or the cloud. But with data centers and cloud computing traditionally supporting data flow, where does edge fit in? As a form of distributed computing, edge computing enables processing to happen where data is being generated. The convergence of 5G networks with edge computing means data is not only traveling faster, but can be quickly translated via media, inferencing and analytics into insights and action, enabling new, ultra-low latency applications to come to life. An autonomous vehicle that senses a pedestrian moving into the road may have less than a second to stop or swerve to avoid hitting them, and removing the latency caused by the data traveling to the cloud and back could literally be life-saving. Other benefits of analyzing data at the edge include stronger security protection of data, lower transportation costs, enhanced data quality and increased reliability, particularly in rural or remote places. A fireside chat with Intel youtu.be The opportunities and challenges of edge adoption The ability to make fully autonomous vehicles a reality is just one example. Together, 5G and the intelligent edge will enable a new era of distributed intelligence that will transform all types of industries, from smart cities to health care. According to IDC, 77% of U.S. organizations regard edge as a strategic business investment. The need for edge solutions has also been accelerated by the pandemic due to trends like distributed workforces, the growth of remote environments and companies' digital transformations. At the same time, while realization of the value of the intelligent edge is growing, companies are struggling to find the right resources to move adoption forward. An IDG survey found that top challenges include identifying clear use cases, security, a lack of internal skills and cost. If the age of distributed intelligence is to reach its full potential, solution providers will need to rely on proven hardware and software platforms, supported by trusted partners with industry-specific experience. The intelligent edge, practically applied On the factory floor, the convergence of technologies like edge, 5G, AI and automation is setting the stage for sectorwide Industry 4.0 transformation. Specifically, edge computing is enabling manufacturers access to real-time insights about operations, which allows them to automate control and monitoring processes, optimize logistics and anticipate and correct anomalies before they impact production. Modernizing the factory can be a complicated process due to the time and cost associated with replacing legacy systems with new technology and ensuring everything seamlessly integrates. However, edge computing with 5G can also provide greater flexibility to connect the factory in stages over time, since compute is localized. Intel is currently working with partners to build an end-to-end smart factory to demonstrate how with a modular application environment, digitalization can happen at any scale. In health care, edge computing could have a similarly transformative effect on patient care. In the near-term future, edge devices may help with sharing real-time data about patients' vital signs as soon as they enter an ambulance. Instead of having to run an assessment and additional tests once the patient arrives at the hospital, doctors and clinicians would be able to utilize the data already gathered to begin care immediately, continuing to assess, analyze and adjust treatment through the operative and the post-operative phases and beyond to ensure care is always personalized and based on the most up-to-date information. This is a single example; already, edge devices are being used in many other areas of health care to aid with advanced remote patient monitoring, image-based diagnostics, medical equipment management and robotic surgery. What's next for intelligent edge adoption As companies' edge innovations scale and mature, moving from POC to full-scale deployment, collaboration will play a large role in the success of projects. Solution providers are beginning to realize the value of partnering with technology providers with deep, purpose-built portfolios and industry experience to develop customized edge solutions that drive efficiencies and outcomes. Security will remain a key concern, with connected, intelligent devices making attractive targets for attackers interested in stealing data or disrupting the flow of operations. For that reason, providers should also seek platforms infused with silicon-level telemetry to improve the detection of advanced threats at every level. Distributed computing will enable limitless potential by ensuring many everyday devices aren't just connected, but intelligent. In this future, data will no longer be stored in centralized locations, but always moving to where it can provide the most value. The companies that master the manipulation of data this way will be the ones to unlock its true potential, unleashing a new wave of innovation. Keep Reading Show less Rene Torres Rene Torres is currently the VP / General Manager of IOT Sales and Marketing Group at Intel Corporation. Rene has been with Intel for 20+ years having started in 1997. Rene has worked in multiple management roles including sales, marketing, product management, and platform application engineering for Intel Architecture and software solutions with a special focus on markets such as wireless communications infrastructure, networking and mobile client computing. Prior to his current role, Rene was the Director of Marketing & Platform Enabling for Software Defined Networking and Network Function Virtualization in the Data Center Group (DCG). Rene was also the chief of staff and technical assistant to Doug Davis, SVP and GM of the Internet of Things Group (IOTG). He has worked abroad under three expat assignments in Brazil, China and Germany. Rene has a BS in Business Administration from Pepperdine University and MBA in Global Management from the Thunderbird School of Global Management. sponsored sponsored content amazon Entertainment Amazon didn't buy MGM for the content. It bought MGM to help its ad business. Amazon's ad-supported video efforts have been getting a lot less attention than its Prime Video efforts. That might change soon. Advertising has become a massive business for Amazon. Photo: Saul Loeb/AFP via Getty Images March 17, 2022 Janko Roettgers Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland. March 17, 2022 Amazon has officially closed the acquisition of MGM, it announced Thursday morning, following an approval by EU regulators. Amazon first announced its intention to buy MGM for $8.45 billion in May, and EU regulators now decided that the deal doesn't violate antitrust regulations because "MGM's content cannot be considered as must-have," according to Variety. Ouch, that hurts, but it also helps to put the acquisition into context. Sure, acquiring MGM will help Amazon produce more exclusive content for Prime Video, and specifically could help the ecommerce giant get access to high-profile movies in order to better compete with Netflix and Disney+. But at least in the near term, it may actually have a bigger impact on something that is only loosely related to Prime: Amazon's $31 billion advertising business. * MGM is home to a couple of massive film franchises, including Rocky and James Bond, which it co-owns with Eon Productions. Some of the studio's other recent high-profile movies include "House of Gucci," "Licorice Pizza" and "Cyrano." * Amazon's approach to movies has been a lot less disruptive than Netflix's: Amazon Studios regularly releases films in theaters first before they stream to Prime subscribers. * On the TV front, MGM has worked with a number of Amazon's competitors: "The Handmaid's Tale" streams on Hulu, "Fargo" is a key FX property and "Vikings: Valhalla" is currently in Netflix's Top 10. * It's fair to assume that MGM's TV efforts will eventually shift focus to bolster Prime, but this is likely going to be a years-long process, similar to the slow unwinding of Disney's partnership with Netflix and NBCUniversal's support of Hulu's library. * Amazon said last year that MGM "complements the work of Amazon Studios," suggesting that the studio will continue to operate as a separate brand and entity. In other words: It's much more than a Prime content mill. MGM's huge catalog will have a bigger near-term impact. The studio owns 4,000 films and 17,000 TV show episodes; Amazon has said that it plans to "help preserve MGM's heritage and catalog of films, and provide customers with greater access to these existing works." * Some of the MGM movies and shows that haven't been available on subscription services, including recent Bond titles, are likely going to find their way to Prime. * It's safe to assume, though, that a good chunk of this catalog will also pop up on Amazon's free, ad-supported streaming service, IMDb TV, sooner or later. Advertising has become a massive business for Amazon, in part because of the fees the company charges sellers for sponsored listings on Amazon.com. * However, the company's video ad business has been growing as well: A year ago, Amazon told Upfront buyers that it was now streaming ads to 120 million viewers a month. Expect even bigger numbers when Amazon returns to the Upfronts this year. * IMDb TV has been a key part of Amazon's video ad strategy. As a free service, it allows the company to stream content to and make money from people who don't pay for Prime. * But Amazon also seems perfectly content using IMDb TV as a vehicle to stream ads to Prime subscribers as well, setting it apart from the way Disney and others approach advertising in a subscription video context. Instead of providing a cheaper tier to customers willing to watch ads, Amazon simply presents IMDb TV as a free add-on. * Want to watch "Mad Men," "24" or "Lost"? Then just deal with the ads, no matter whether you pay for free shipping or not. Amazon does have big plans for IMDb TV. Not only is the service streaming exclusive shows, including a "Bosch" spin-off, but there have also been persistent rumors that it is getting a new name to appeal to an even wider audience. * Amazon has been experimenting with different brands abroad. In India, for instance, the company has been streaming ad-supported video with a service called miniTV, which is available through the company's mobile shopping app. * Amazon applied for a U.S. trademark for miniTV in October. * The company also recently renewed a trademark application for Fireview, which could be another contender. * It's even conceivable that Amazon might use one of MGM's brands for an IMDb TV relaunch. Free Epix, anyone? Whatever the brand ends up being, one thing is for certain: Amazon's ad-supported video efforts have been getting a lot less attention than its Prime Video efforts. With the MGM deal about to close, that could be changing soon. A version of this story also appeared in today's Entertainment newsletter; subscribe here. Keep Reading Show less Janko Roettgers Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland. acquisitions mgm amazon imdb tv prime video salary series Workplace Pay equity is easier than you think Credit Karma's chief people officer on how to achieve pay equity. Pay equity is a problem in nearly every industry, including tech. Photo: Monstera/Pexels March 17, 2022 Michelle Ma Michelle Ma (@himichellema) is a reporter at Protocol, where she writes about management, leadership and workplace issues in tech. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com. March 17, 2022 This week marked 2020's Equal Pay Day in the United States. What that means is that women in this country have to work until March 15 to make what men earned in the previous year. Historically, that date is even later in the year for Black and Latina women, who face an even greater gender pay gap. Pay equity is a problem in nearly every industry, including tech. But there are things that HR leaders can do to get closer to parity. Chief among them is systematizing pay practices to root out areas where bias can occur, from hiring to promotions. Protocol spoke with Credit Karma's Chief People Officer Colleen McCreary about the company's pay equity program, role-based compensation and the $15 million it spent three years ago to overhaul its compensation system, resulting in raises for 98% of Credit Karma employees. We also chatted about inflation and what that means for worker wages in light of a new Credit Karma study released this week. The main finding? Perhaps unsurprisingly, two-thirds of American workers feel that their pay is not adequate to cover the rising cost of inflation. This interview has been edited for brevity and clarity. March 15 was National Equal Pay Day. When would Equal Pay Day be for Credit Karma's female employees? Since we have a very strict pay equity program, everybody in the same role makes exactly the same amount of money. Historically, certain functions tend to be primarily female, and they tend to pay lower. What we've done is we looked at the market for the skills and role that people have to have. So a director of Public Relations is going to be making something fairly similar to a director of Engineering because the management capacities are the same. So you're saying that even unadjusted for role and experience, there is no gender pay gap at Credit Karma? Correct. And every time we talk to another company, they're like, "You do what?" So when you're talking about paying the heads of Public Relations and Engineering similarly, are you correcting for the effect of occupational sorting and women gravitating toward certain lower-paying jobs? Right. There's usually this backlog in history of jobs that were traditionally female-based being paid lower. What you find in tech, actually, is that most companies are sophisticated enough at this point to recognize and appreciate what those positions are worth. I don't think you would say that broadly. I think if you had factory workers, for example, there's probably still a broad differential between those roles and how they're leveled and paid. In marketing, HR, and sales to some extent -- depending on if it's technical sales or non-technical sales -- the competition for talent compensation is a supply and demand issue. And so the competition in tech for these roles is so high that it becomes an equalizer. We talk a lot about the gender pay gap, but what about race? Have you looked at if there's a racial pay gap within Credit Karma? We actually take a pretty data-driven approach to everything. When we look at role-based pay, for example, we have around 1,500 employees, and we have people sorted into 300 different roles at this company. So we're not seeing a pay gap there either. I think the reason for that is we have a nice distribution of people across functions. It's also about making sure that people are getting leveled appropriately, that they're hired into the right jobs and then that they're getting promoted at the same rates. What are the main pillars of this pay equity program? Many pay equity issues come from the fact that managers are generally making decisions around hiring, promotions and potentially bonuses. That's not to say that managers are intentionally doing anything wrong. It's unconscious biases that you bring with you. And they start when employees are hired. Pay ranges are one of the things that contribute to that, where people are slotting somebody in, oftentimes, without any really good judgment, in my opinion, or definition of saying, "Why is this person being paid at the high end of the range versus why this person is being paid at the low end of the range?" It also starts with the leveling, so we built out really clear job levels for each role. We also got rid of performance reviews and ratings. What we do is each role pays whatever it pays, and we do a market review for every single job twice a year. Every February, every August, we do a market review, and we tell the whole company. And if your pay has moved, your pay moves. If it hasn't moved, we have not ever needed to take anybody down. We just don't do that. We think that you should be making whatever is competitive in the market. The other thing that we did is, for most jobs -- except for the most senior jobs that have at-risk pay tied to the company's performance -- we actually rolled the bonuses into base salary for people. So there's no more discretionary bonus that's given to folks. We also moved promotions to be quarterly. So we actually do a full promotion calibration four times a year, which means that if somebody is ready to be promoted, they're not waiting a year. And that means we also don't do any of these last-minute saves. We don't say, "Hey, someone's threatening to quit, so I'm just going to promote you." Doing that goes against every form of pay equity philosophy that we have. Why get rid of performance reviews and ratings? That's something I had actually done at multiple companies. And the reason I had done that is that I personally never saw that they did anything but disincentive people. They were not necessarily reflective of an entire body of work, rather only the last couple of months of somebody's career. What I found is that the people who were top performers were usually annoyed by whatever was happening, and the people who were at the bottom never really got an honest answer from their manager as to why. We've moved to weekly, real-time feedback systems. They're usually more honest, because it's like a micro feedback moment versus this huge dumping on someone. And the other thing that you mentioned was market reviews twice a year. How does that work? We're very clear with our employees that we use [compensation benchmarking database] Radford as our compensation tool for them. It's all posted internally twice a year. We think education for employees is important. I think the easiest thing for companies to do is just to get transparent about where these numbers come from. It helps us stay competitive, especially in fast-moving markets like the Bay Area, New York, Seattle. The other thing that we did around market pay is that we decided that we were going to make sure that every role at Credit Karma made at least the living wage for a family of four in each of our geographies. That really only affects people at the lowest-paying roles, but it was important to us. Tell me about how much this program cost. It must have been an investment. It cost us $15 million. We were about 700 people then, so it was a huge investment. As for getting our board over the line as well as the entire management team, the hardest thing wasn't even so much the $15 million, it was the mindset around meritocracy, or the idea that, "Well, I should be able to distinguish between my two employees based on pay." Everyone loved that 98% of our employees got a raise in their base salary. For some of those people, it might have been like $100. For other people, it was substantially more, especially for those people who were in some of the legacy functions that weren't necessarily always valued, like marketing, communications, HR, finance, as well as many member support functions. Some of those roles saw lifestyle changes for those folks. Credit Karma has two offices in California. And there was a bill recently introduced that would require employees in California to disclose salary ranges in their job postings, which is already required in many other states. Advocates view it as a step toward pay equity. What do you think? I think people are throwing ideas at the wall and hoping that they solve for these pay equity problems. And the reality is, that's not going to change. I mean, you can post a range and where somebody lands in the range isn't necessarily going to change how people pay. This is why I really liked role-based pay: You're in this job, and everybody else who's in this job in Los Angeles is going to make the exact same amount of money, end of story. We don't [post the exact salary in our job postings] and there are a couple of reasons. One is, in many cases, there are multiple levels for each job. And when people are applying, they don't know what sort of role that they should be coming into: "Do I come in as a senior software engineer or a principal software engineer or a software engineer?" I think it's just from a competitive standpoint. I don't have people coming to Credit Karma because they're going to make the most money if they come here. I'm just honest about that. Even in the Bay Area, I'll just say I think you're going to make more money maybe at Facebook, Google or Amazon. I'm not afraid to say it. I think that those people have a reason that they pay very aggressively. That's not why you should come to work at Credit Karma. And for the most part, for the people who come work here, that's not the only thing that they care about. But I'm also not going to lay it on a table for Facebook to be like, "Oh, well, they pay this." For companies like Credit Karma, that know that they can't compete with the Metas of the world on pay, what's the selling point? People join because they're excited about our mission. We are a free product that helps people make financial progress. At the end of the day, the people who want to come here stay here because they are proud of the work that we do and the people that we serve. I always say that there are three things that matter to employees, and you get a trade-off of those three, especially in technology. No. 1 is ownership, No. 2 is compensation and No. 3 is, "Are you proud of where you work?" I think at best, if you can get two out of three, you're usually feeling pretty good. Credit Karma just conducted a survey which found that American workers are really concerned about how their pay is lining up with inflation, which is, as you know, around record highs. Have you raised pay across the board at Credit Karma to account for inflation? So inflation and compensation are actually not connected. I think that's the fallacy. It's hard for people because they're obviously paying out more dollars than they'd like to on their basic needs, but pay is all about supply and demand: that is, the supply and demand of workers. And that's why you're seeing such big increases for hourly workers who sadly have had to drop out due to COVID child care concerns, certainly safety concerns, all these kinds of things. That is why you're seeing hourly pay go up so much versus these more professional, white-collar jobs. The other side of it is that, when inflation is low, you haven't seen people take pay away. So I don't think you want to be in this zone where it just optimizes for one side of the equation. Do you have any advice for other chief people officers on how best to root out bias in their pay practices? I think No. 1 is just being honest and transparent with your employees about how they are paid. I think the light of day will often bring out some of the challenges or things about the systems that might not necessarily be working. A lot of HR people are just living in the fact that they understand and know the data, when the reality is the rest of their workers don't understand. It really helps when you have to explain any kind of concept to the broader audience. You start by explaining to employees how they're paid. $15 million is a lot for a lot of companies. So if it's not something that they can take on, they can take on small steps by at least looking at: Do we do some of these things that lead to pay inequity? Do we make deals with employees to try [to] get them to stay? Do we do a full calibration when we're looking at promotions? There are actually some pretty easy things that are not that expensive that you could do that at least start to bring an opportunity to make some changes to the forefront. So do you show employees what the pay would be for the level above them? We don't do any of that. And I feel very strongly that pay transparency isn't about showing people what other people make. Now, if people want to do that, I strongly encourage it. I always tell people, "Hey, by law, you can talk about what you're paid." But whether or not people want other people to know what they're paid is very private. And it's very different from employee to employee. And I'd rather them make that decision than me doing that. I always say: You can't unsee pay data. I'm not going to put somebody in that awkward position, personally. Keep Reading Show less Michelle Ma Michelle Ma (@himichellema) is a reporter at Protocol, where she writes about management, leadership and workplace issues in tech. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com. pay equity salary series China What Chinese tech CEOs are telling Beijing The Chinese style of lobbying, in the form of "two sessions" proposals, is more open but less effective and helpful in deciphering what tech companies and Beijing want. NPC and CPPCC proposals are supposed to be expert advice on what the Chinese government should do next. But they can often double as open lobbying efforts. Photo: Paul Yeung/Bloomberg via Getty Images March 17, 2022 Zeyi Yang Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick. March 17, 2022 The CEOs of China's largest tech companies have a wishlist for their government -- at least, a version of their wishlist they can say publicly -- for this year: Watch out for metaverse risks! The more electric vehicles, the merrier! Make AI greener! Every year around March, Beijing holds the most important national political meetings: the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC), usually referred to as the "two sessions." Thousands of members -- government officials, entrepreneurs, workers and academics -- gather in Beijing for legislative discussions and to submit their "suggestions" (for NPC) and "proposals" (for CPPCC) to the national government. These proposals are supposed to be expert advice on what the Chinese government should do next. But they can often basically double as open lobbying efforts. While lobbying is not officially allowed in China, business leaders who moonlight as two sessions members are free to make suggestions that benefit their own businesses. An electric vehicle company CEO, for example, could propose to advance the electrification of transportation, and it would not be seen as a conflict of interest. Half of China's most powerful people in tech are NPC or CPPCC members, including the founders of Tencent, Baidu, NetEase and Xiaomi. "Pony" Ma Huateng, CEO of Tencent, has been an NPC member since 2013 and has submitted over 50 suggestions in the past decade. But not every tech executive has gotten involved: Neither Alibaba's Jack Ma nor ByteDance's Zhang Yiming have ever joined the national meetings. Personal scandals can also affect tech execs' political participation. In 2019, "Richard" Liu Qiangdong, CEO of JD, China's second-largest ecommerce company, quit his position as a CPPCC member soon after a sexual assault accusation against him. Every year thousands of proposals and suggestions are submitted to the two sessions, of which about 80% will be distributed to relevant national ministries. Those ministries in turn are required to address these issues and write replies. The replies "perhaps more often than not reflect the government's existing positions, but sometimes they do offer hints to possible changes in the future," Zichen Wang, a journalist with Chinese state media outlet Xinhua, wrote in his personal newsletter. With China's government messaging often being murky, these proposals are helpful for deciphering what's in Beijing's favor each year. Here are what China's tech CEOs proposed to Beijing during the 2022 two sessions, which ran from March 4 to March 11. Tencent founder and CEO "Pony" Ma Huateng As an NPC member, Ma Huateng submitted six suggestions covering a wide range of topics this year. Protocol previously reported how much Beijing values the idea of the "digital economy," but Beijing has also been wary of the tech industry potentially driving out the brick-and-mortar economy. Ma's first suggestion precisely addresses that concern: "Build up digital economy strengths by systematically facilitating the integration of digital and real economy." He's basically proposing that digital technologies, which Tencent is undoubtedly spearheading in China, can assist, rather than compete with, traditional sectors such as manufacturing. Ma's suggestions also mentioned buzzwords such as Web3, NFTs and the metaverse, but not in a positive way. He instead cautioned against financial and governmental risks that come with these new phenomena. Some of his suggestions focus on using technology to preserve and promote Chinese culture and improve disaster responses. (He conveniently plugged in how Tencent's shared docs product played a role in coordinating resources after the summer 2021 flood in China.) And other suggestions are less technology related, such as promoting environmental protection in southern China and rural development. Baidu co-founder and CEO Robin Li In recent years, Baidu has been rebranding from a search engine company to an AI company, and Robin Li's CPPCC proposals stay close to what the company's been doing. One of his proposals connects AI technology and climate, advocating for developing "Green AI" that consumes less energy. His other two proposals center on self-driving technologies. Li proposed that China should expedite legislation for self-driving cars to get on the roads safely and encourage the overall digitization of China's transportation system. It's no coincidence that Baidu's Apollo Robotaxi is one of the companies closest to offering commercial self-driving taxis in China. Xiaomi founder and CEO Lei Jun Xiaomi is one of the highest-profile tech companies that has pivoted to making electric vehicles. It seems fitting that two of Lei Jun's NPC suggestions this year were about electric vehicles: one advocating for building more EV charging infrastructure, and another proposing a "carbon footprint auditing system" for EVs that help the industry stay on track with China's climate goals. His two other suggestions asked private companies to invest more in corporate social responsibility -- reminiscent of the "common prosperity" goal Xi Jinping introduced last year -- and push for China to improve its electronics waste recycling system. Sequoia China founding partner Neil Shen The only CPPCC member from a venture capitalist background, Neil Shen's five proposals hinted at the sectors that his fund may continue to invest in. As consumer tech companies often fall prey to China's increasingly strict regulations, advanced technologies in biomedicine and environmental science have become more popular among investors. Shen's five proposals this year include: accelerating the revolution of green, low-carbon technologies; researching the commercial application of microorganisms in agriculture; improving China's pharmaceutical innovation capacity; investing in neuroscience research; and supporting the manufacturing industry to go digital and intelligent. Lenovo CEO Yang Yuanqing Among the tech CEOs, Yang Yuanqing's NPC proposals seem the least connected to his own business's interests. One proposal he submitted this year called for more gender equality in employment, including equal pay, a minimum quota of female representation in workplaces and a flexible parental leave system for both men and women. His other proposal focuses on supporting small and medium-sized businesses by providing favorable tax policies and government support in digitization. NetEase founder and CEO Ding Lei While NetEase is mostly known as a gaming company these days, Ding Lei's CPPCC proposals are more diverse than his company's businesses. The only proposal that seems closely related to NetEase called for building an "international platform for intellectual property trading." The NFT craze in the West has inspired several Chinese tech giants to build blockchain-based digital IP protection systems, and NetEase is one of them, with its platform Planet NFT released in January. Ding's other proposals focused on EV battery material research, electric bicycles, emergency medical services education and the civil aviation industry. Keep Reading Show less Zeyi Yang Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick. policy tencent xiaomi baidu lenovo politics Latest Stories See more Most Popular The fight over anonymity is about the future of the internet Microsoft overhauls its partner program with a distinct focus on Azure Cord cutting is sending TV networks to the cloud What will be the biggest challenges when it comes to hybrid work, and what should companies prioritize to overcome them? Google employees say its return-to-office plan is unfair Amazon didn't buy MGM for the content. It bought MGM to help its ad business. 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