July 13, 2022 - Podcast

Episode 287 — Reproductive data privacy, and CEO pay

When the Supreme Court overturned Roe v. Wade, some people wondered whether their online data and app usage could reveal if they had an unplanned pregnancy. Social media users posted ideas about how to protect people’s reproductive privacy, including entering “junk” data into apps designed for tracking menstrual cycles. People use period tracking apps to predict their next period, talk to their doctor about their cycle and identify when they are fertile. The argument for submitting junk data is that doing so will trip up the apps’ algorithms, making it difficult or impossible for authorities or vigilantes to use the data to violate people’s privacy. However, IU informatics researchers say that argument doesn’t hold water. IU's Katie Siek, Alexander Hayes and Zaidat Ibrahim develop and evaluate technologies that help people manage their health. They analyze how app companies collect data from their users to provide useful services, and they know that for popular period tracking applications, millions of people would need to input junk data to even nudge the algorithm. Junk data is also a form of “noise,” which is an inherent problem that developers design algorithms to be robust against. The researchers say that even if junk data successfully “confused” the algorithm or provided too much data for authorities to investigate, the success would be short-lived because the app would be less accurate for its intended purpose and people would stop using it. Additionally, it wouldn’t solve existing privacy concerns because people’s digital footprints are everywhere, from internet searches to phone app use and location tracking. This is why advice urging people to delete their period tracking apps is well-intentioned but off the mark. The researchers say that instead of brainstorming ways to circumvent technology to decrease potential harm and legal trouble, people should advocate for digital privacy protections and restrictions of data usage and sharing. Companies should effectively communicate and receive feedback from people about how their data is being used, their risk level for exposure to potential harm, and the value of their data to the company.

In other news, through the Tax Cuts and Jobs Act of 2017, Congress attempted to curb CEO pay by repealing a long-standing exemption that allowed companies to deduct large amounts of qualified performance-based pay. New research finds the change has had little effect, with CEO pay either staying the same or growing after the law made it more costly to award executives with high levels of compensation. The intention of the legislation was to move top-executive compensation away from stock-based compensation and performance pay that can lead to a myopic emphasis on short-term results and toward cash-based fixed compensation. Professors at IU, the University of Texas and the Chicago Booth School of Business examined CEO pay packages before and after the tax policy change and found no evidence that companies affected by the law changed total compensation, compensation mix or pay-performance sensitivity. IU's Bridget Stomberg, an associate professor of accounting, says it's politically amenable right now to tax corporations and executives with the goal of reducing income inequality. But Stomberg and her colleagues' research -- and that of others -- suggests that taxes are not a big enough stick to change the structure or the magnitude of executive compensation. She says they found no evidence of significant reductions in CEO pay or performance-based pay, which is counter to what Congress intended. The study was recently published in the journal Contemporary Accounting Research. The results broadly suggest that taxes are not a first-order determinant of executive pay and that tax regulation could be relatively ineffective at curbing executive compensation in response to growing income inequality. Stomberg says this finding has policy implications, as some in Congress propose a federal corporate tax surcharge linked to the CEO pay ratio. The cities of Portland, Oregon, and San Francisco have implemented business taxes tied to CEO pay ratios, which also have been proposed by at least eight states. She says policymakers should reconsider whether changes to the taxation of executive compensation are a viable path towards addressing the perceived issues of excessive executive pay and inequality.