I don't speak for Amazon, Facebook, Bezos Academy, or any of my previous employers. The intentions behind company policies are my interpretation, nothing to do with official statements. The below is strictly my opinion.
I spent years working on employee compensation with HR, recruiting, and employees. Amazon's and Facebook's compensation policies are no different than the majority of large corporations. They interview candidates, decide who they'd like to hire, and then they negotiate with potential employees to reach an agreement regarding how much employees will be paid for their services.
Employee pay falls into what is called a salary band. This is the range of pay for a certain role / level. For example, a web designer level 5 might be paid between $50k-$100k. Different roles have different bands, and each level has a higher or lower range. This range determines what amount a new hire can be offered for that job, and is also a cap on compensation for raises.
Employees want to be paid well; both in absolute terms, as well as relative to their co-workers. Companies want to hire and retain employees at minimal expense. Companies reduce compensation paid to employees by taking advantage of those who are already paid less than their peers, those who are less experienced in negotiation, and those who are less financially secure. By paying some employees less, it lowers the average compensation rate, and also enables companies to pay higher compensation to those who negotiate well and are already paid more than their peers (and therefore expect more).
If a company announced that they intended to pay minorities and women less for the same jobs, that would be illegal. That company would also be roasted by public opinion. Yet this is exactly the output of our current system. Racism and sexism is not only about intention, it's also about results and actions taken. If you have purposefully implemented a system with the intended result of paying some employees less than others for the same work, you are acting racist and sexist. Intentional or not.
Proposal: Companies should adopt a compensation model where they have strict documented roles and levels, and at those roles and levels, employees should all be paid exactly the same amount.
Note: I'm going to ignore location for this article, as that is a complex topic which would make this article far too long.
- Every role / level has an exact compensation level. This can be salary, or a combination of other compensation (e.g. stock, options).
- If external candidates cannot be hired at this compensation level (or if employees are leaving due to low compensation), the company has the option of raising the compensation for that role / level. For the whole company.
- Every role / level has a clearly documented set of expectations. As this is the only path for employees to increase their compensation, the company will need to focus on supporting career growth.
The key to this proposal is that a clearly defined role / level definition which defines how much someone is paid is more transparent and auditable than a black box compensation scheme. Minorities and women can't know if they're underpaid with a secret compensation system. Roles and levels are usually known by employees. This allows them to compare their abilities and responsibilities with the roles / levels definitions, and determine if they're being treated fairly. The entire system would be auditable (easily viewed, compared, discussed) without secret data being involved.
I don't believe that the individuals setting negotiation policies at companies intend to create biased compensation. Yet the results speak for themselves.
Studies frequently show that minorities and women are paid less (on average) for the same positions and/or education levels.
...employers may discriminate in pay when they rely on prior salary history in hiring and compensation decisions; this can enable pay decisions that could have been influenced by discrimination to follow women from job to job - americanprogress.org
If you have participated in salary negotiation, you know that candidates with a solid current job negotiate better than those without a job. Candidates with lower current pay receive less in their new jobs. Even if the current company is not biased in how they negotiate compensation, past bias will travel with candidates.
When I left Amazon for Facebook in 2014, I had a secure position at Amazon with great compensation. As a confident white male, I was able to repeatedly push back at the negotiation table, demanding significantly higher compensation. I received higher compensation than other peers hired to the same role. I was not more valuable to Facebook, instead I had negotiation privilege.
This bias is not strictly related to race and gender. In contrast to my above example, my career had started in Illinois, where the pay is significantly lower than the West Coast. When I received my original Amazon Seattle offer in 2007, I was astounded by how high it was. I accepted the offer without negotiation. It wasn't until I started working at Amazon that I realized that I was paid less than my peers. Not because I was less valuable to Amazon. Instead my pay was lower in Illinois, and I didn't have experience negotiating. While bias against lower income regions is not a protected class, it is still bias unrelated to job performance.
If you believe that women and minorities are likely to have lower pay currently, then your company is likely to carry that lower pay forward into their next job. Unintentional racism and sexism.