Pay for (Privacy) Performance

Abstract

Social networking has proliferated over the past years and is now being utilized by a large percentage of the world’s population. Social networks substantially contribute to enhanced speech, creativity, and communication. Yet, their practices of collecting and monetizing personal data of users pose severe privacy risks. Compelling social networks to internalize these risks is crucial for the healthy evolution of social networking. In this Article I propose a novel approach to address this challenge: to link executive compensation in social networking firms to the quality of data-protection the company provides to its users. This proposal is different from other solutions that have been proposed in the context of social media privacy in two significant ways. First, the direct policy object is not the firm itself. Rather, I suggest to influence executives within the firm by manipulating their pay to achieve the desired results. Second, the proposal offers a dynamic solution, where privacy practices would adapt to changing privacy standards. This proposal would yield a number of key advantages. First, it would create a powerful incentive for executives of social networks to internalize users’ privacy interests. Second, the proposed model would provide first-hand and up to date information about users’ changing needs and interests. Third, this model would align the interests of social media executives with the long term interests of shareholders to maintain users’ trust in social media, in order for social networks to continue to attract a high volume of users and activity. Fourth, the model would reduce the government’s role as both an interpreter and enforcer of users’ interests, and would overall simplify the privacy enforcement process and reduce its costs. Finally, this model would allow social networks to develop and grow, by allowing all types of transactions to occur, as long as all privacy-related considerations are internalized.