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0:00:00.2 Chris Dohrmann: You’re listening to Prosperity at Work from JPMorgan Workplace Solutions, a podcast all about equity compensation, financial well-being and more. I’m your host, Chris Dohrmann. Hard to believe, but we’re almost at the end of another year. And before the chaos of the holiday season begins, stock plan admins everywhere will be facing a ton of admin problems as they get their plans business in order for the financial year end. But where to begin?

Today’s guest is Georgina Lai, a consultant in equity compensation. She has a storied career running programs for Facebook, Reddit, Pinterest and others. She has just the insights you’ll need to take the pain out of year end prep. Georgina, welcome to the show.

0:00:44.5 Georgina Lai: Thanks, Chris, for having me.

0:00:46.6 Chris Dohrmann: I just wanted to let everybody else know, because we’ve known each other for a while. Can you tell the listeners a little bit about yourself? Because you have a very impressive background.

0:00:56.6 Georgina Lai: Oh, well, thank you. I have been an equity professional now for over 15 years. I’ve had the pleasure for working for some pretty large companies. I’ve worked for Salesforce and Facebook or now known as Meta and some other companies like Reddit and Instacart and Pinterest. I also took a little sideways journey into product working for Nasdaq Private Market, helping them build a cap table and secondary market product.

0:01:30.2 Chris Dohrmann: Amazing. Thank you. Let’s start at the beginning. We’re in the fourth quarter and we’re talking about what we’re going to do at the end of the year and to avoid all of the pitfalls and problems. Where do you want to start?

0:01:42.5 Georgina Lai: Well, I think we should start with data. How is your data at your company? Surely many established companies have automated feeds going in and out of their equity platform. But when was the last time you’ve checked those feeds? Have you audited those feeds? I would assume you would be auditing them on a monthly and quarterly basis, but perhaps it might be good to audit it on a six month running basis as far as maybe there have been changes from your HRS system and were they appropriately reflected in your stock system? So that’s one of the first places I would start, absolutely, to ensure that your data feeds are working as you expect them to and that any changes, backdated changes, are captured appropriately and reflected accurately in your stock administration system.

0:02:37.4 Chris Dohrmann: I think that’s a great point because you will know when your internal IT at any company is doing something or a refresh. You don’t always know when the payroll system or the HR system or something is doing a refresh that may not be compatible or may have caused the glitch.

0:02:53.5 Georgina Lai: Also, you do have people who leave the company in the middle of the year. And as you’re heading towards the end of the year, you’re thinking about, okay, well, there’s payroll reporting. Do we have the most recent address and contact information for your terminated employees? Because it will be important for their end of year tax information to be able to reach out to them and make sure that they have everything they need to file their US tax returns.

0:03:20.5 Chris Dohrmann: You have already mentioned tax and you’ve mentioned data. So you’re talking about the IT, the HR system people, payroll people, and that’s one side. But I mean, are there other audits or are there other reports or are there other things that you should start to look at now for the rest of the stakeholders?

0:03:36.6 Georgina Lai: Certainly, you know, HR and the payroll team are teams that stock administrators work very closely with. So they are my first go-to. Secondly would be the tax team. If you have incentive stock options in the US, do they have the information they need to, you know, or what is their timing for disqualifying disposition reporting and everything? It is a good time to connect with them and understand their timelines so that you can prepare yourself and your team accordingly. Also, I like to check in with the legal team. If the stock team has been responsible for filing Form 4s on behalf of the Section 16, or if it’s even your legal team or outside counsel, just a quick sync with them to make sure that they have captured all the transactions. So an audit of that information on what you filed would be a good thing to do at this point in time, just to make sure that everything is clean and good for the year to date.

0:04:35.9 Chris Dohrmann: .You bring up the point about making sure that you check with your stakeholders about their schedule because they’re going to be very, very helpful. And the fact that you’re coming in early and explaining to them that you want to make sure that they get the right information and everything can be done once, I’m sure is well received.

0:04:55.3 Georgina Lai: Absolutely. I think it shows great partnership with your stakeholders to be proactive and it just strengthens the relationship further, I think.

0:05:04.7 Chris Dohrmann: Let’s drill into the data because I think some of the biggest issues or some of the issues since the pandemic that have been coming up are all related to addresses. I maintain that the largest companies probably know where 95% of their employees live. I think there’s probably 5% that either have been in another jurisdiction or have moved and have failed to notify anybody. But what’s your experience with that?

0:05:35.4 Georgina Lai: Mobility is a tough one. And certainly with a pandemic, the lockdown where people kind of worked remotely pretty much from anywhere, and maybe they’ve stayed since then if your company is still remote. But yeah, it is such a challenge to find out where people are working from these days, especially if you have still a hybrid model or a remote model. So I do think that partnership with the HR team and even the payroll team, that’s very important for them to understand where employees are. So that for me, I think, is a more robust sort of action to take in connection with your HRAS and payroll teams. And it might be something that you can schedule on a yearly basis just to send out polls to understand where people are. The other thing is I think it would be really helpful to have a meeting with people managers to ensure that managers understand where their direct reports are working from, because surely they can be helpful in helping you find out where your employee base is working from, because you could be tripping up some tax issues if you’re not aware actually where your employees are working.

0:06:53.7 Chris Dohrmann: Now that we’ve talked a little bit about, and you raised mobility, I wanted to talk about international participants. And they bring in some unique challenges there. So when you’re doing year-end and you have to deal with multiple countries, what’s your biggest challenge in that respect?

0:07:11.7 Georgina Lai: Often it’s for our non-US employees, for the international employees, I think a large challenge, certain countries may have not issues per se, but addresses are different in the way the US records addresses. So sometimes it’s addresses that say, oh, you know, three blocks down from the water tower or something. So having to check in on that is very helpful just to ensure that your records are accurate because from a US perspective, I often go, is that the official address? So following up with your HRIS team or the employee directly would be very helpful. The other thing I’ve noticed for non-US employees, they often put down the company address as their home address, or they have their mail delivered to their address or to their family’s home or whatnot. And sometimes that might cause issues, especially if they’re newer employees and their new hire employees might cause trouble with opening up brokerage accounts for their equity compensation piece. So this might be a good time of year just to kind of spot check it and look at some of these addresses that, oh, that’s the company address in our office in China or in Singapore.

0:08:37.5 Georgina Lai: So just double checking those addresses I think is very helpful. It is a challenge, I will say, because often employees go, well, I have my mail routed to my parents’ address or to the office address. But explaining that, oh, well, you will need to open up a brokerage at some point so we can deliver your equity compensation. We need it to match your government ID or something to that effect in order to drive home the importance of having clean, accurate records. So that’s always a little bit of a back and forth. I feel that you should allow yourself some time for that back and forth to really get down to cleaning up your data for employees.

0:09:22.9 Chris Dohrmann: Yeah, I feel your pain there. You had also mentioned when you were giving everybody your background that you worked for large public and private. So we’ve talked a little bit about publics and multinationals and some of the challenges they have because of their size. What are the challenges for a private company that may be pre-IPO?

0:09:43.3 Georgina Lai: Well, my experience has been that private companies are scrappy and they’re doing a lot of work with less resources, less human capital, for example. Often I’m a department of one at a pre-IPO company. So there are challenges there because sometimes you have so much on your plate that so many important tasks become backburner projects. So in my experience, I’ve noticed that things can be a little more loosey-goosey regarding, say, addresses. That’s a huge pain point, right? Again, the same thing you experience at a public company where it might be just a few here and there is often the case where the majority of your employees don’t have their own addresses listed in your system of record. They use the company address. So I do believe a stitch in time saves nine. And so if you can get ahead of that and have a project to update those records, it will save you when you’re heading down the IPO path in rushing and trying to find these people’s addresses so that they can have brokerage accounts and whatnot. So at a private company, I always like to act as though I’m a public company when I’m at a private company.

0:11:05.3 Georgina Lai: So ensuring rigor in compliance, even though you’re not necessarily beholden to all of the compliance out there for public companies, but just really focusing on acting as though you were a public company. So along with that is ensuring data integrity. And that is the biggest challenge I feel at private companies, because not only does the equity professional have to deal with the employee base, but they’re also oftentimes, in many ways, the transfer agent. And so they are responsible for the company cap table. And oftentimes your investors, you might not have addresses for them either, contact information. So that’s always a good project to try to get ahead of to make sure that you have contact information for all of your shareholders.

0:12:01.9 Chris Dohrmann: You know, it’s funny, people that are digital natives, so people that grew up with an iPhone and email and texting and messaging, I think sometimes lose touch with the fact that addresses are sometimes used for other things. So whether it’s validation for an address change, you may want to send it to the old address to make sure that the address was done properly. So the fact that you’re bringing it up and making sure people realize that there’s a valid reason to have the proper address there, I think is a good idea.

0:12:31.0 Georgina Lai: To your point, Chris, being digital native, you’ve got to make sure that you have their personal email address. And that’s, you know, usually it’s their official email address for, you know, work, personal as far as like interviewing and whatnot. So I think a really good strategy to have when people leave the company, especially when you’re private, is remind them, hey, can you confirm this is the right email address we have on file for you? Because, you know, periodically we will reach out because if you’re a private company that issues, say, RSUs that have this, you know, life beyond you working at the company and can be delivered to you at a future date and time, it’s really important to understand your contact information. So key would be their email address and emphasizing to the exiting the employee that please, you know, check your email every so often for emails from the HRS team or the stock team, because we will need to reach out to you when the company is ready to go public in order for you to get the shares owed to you from your private company RSUs. So it’s always a rush to try to find these people who have been off your payroll system for three or four years, and the only team that has the need to reach out to these former employees is the equity team.

0:13:58.5 Chris Dohrmann: I wanted to talk about regulation next. So I don’t think this is a year where we have to worry about big regulatory changes, though the SEC has talked about disclosure changes in financial reporting, and there are more and more states coming on board with some type of inclusion of equity into their pay transparency rules. So maybe that’s something that you have to think about in 2026. But as far as regulation, it’s not just U.S. You may have some new regulation, multinational, that you have to take care of, and it’s usually something that comes up at the end of the year. Is that a challenge for you?

0:14:35.3 Georgina Lai: Yes. And something to, as a reminder for the listeners, is that not all countries abide by the calendar year and reporting requirements, right? So sometimes their tax year is not calendar year. So understanding where your employee population and your obligations for filing for regulatory purposes, having a calendar of those due dates is really very important so that you can work towards it. I usually have like the filing deadline for the particular country and then reminders leading up just to give yourself ticklers to remind yourself, hey, don’t forget, you have to gather this information for reporting requirements. Now, usually I partner with perhaps an outside accounting firm to help with those filings or an external law firm. So it’s important to work with them as well as your internal legal team because they also may be helping in that respect. And also looping in your accounting team because oftentimes there’s information from them that needs to be gathered for the disclosure. So just reminding them, being a little project manager in a sense with your cross-functional teams to remind them, hey, this is coming up. I also like to have little meetings with the teams to just say, hey, don’t forget in three months time we have this filing coming up just to make sure everybody’s on the same page.

0:16:01.9 Georgina Lai: And with that, I also really emphasize continuing education for equity professionals that going to, say, a GEO conference or an NASPP, a local CEPI sort of conference because oftentimes that’s where you get a lot of this information from and you can consult with your peers in the industry to kind of see how they’re preparing for it and gives you ideas. So really, I feel like when regulatory change is happening, it’s really important to have that community around you to kind of assess what big an impact, if any impact it will have on your operational and so that you can bring that back and share with your internal teams. So shout out to those organizations.

0:16:50.7 Chris Dohrmann: Yeah, you get to test your ideas with other people and see what they’ve done for the same challenges. And I just want to list just for the listeners that don’t know, GEO is Global Equity Organization, NASPP is the National Association for Stock Plan Professionals, and CEPI is the Certified Equity Professionals Institute at Santa Clara University.

0:17:11.0 Georgina Lai: Yep, all great resources of information and I’m a member of all three, so it’s been very helpful over the course of my career.

0:17:21.2 Chris Dohrmann: Great. And I’m sure that’s a place where you would be able to socialize or to bring up checklists. So year-end checklists that basically are the same type of ticklers that you talked about in other situations that you know that you’ve done each thing in order and you’ve talked to each team in order. So I mean, is a checklist something that you rely on other than the tickler files?

0:19:21.4 Georgina Lai: I love a good checklist. I’m a big checklist person. I definitely develop a bunch of checklists and when I go to a different role or a different company, those checklists come with me and then I modify the checklist for that company because it’s not a one-size-fits-all, right? But oftentimes, the checklists are so important because you have a document there so that your team can follow, that your business partners, they know what to expect as far as timing because on my checklist, I have timing. So for example, at month end, I will say to all my business partners, primarily accounting at this month end, is that day one of month end, you’re not going to get anything from me. That’s the day that I am auditing all the data to ensure for accuracy before I start running reports. And that gives me a day to correct anything that may be incorrect. And then assuming that all goes well, day two is when I start running, say, the reports for the accounting team. Day three is when I run reports for the tax team. So they know when to expect information from the equity Team and then they can go about doing the other work that they have to do for the month end close or the quarter end close. So yes, the checklists are great. It’s a living document and I do go into detail. Sometimes it’s by 3:00 PM. By end of day, you will receive this. And it’s very important for me and my team to adhere to those timelines so that the accounting team always knows what to expect from the equity team. And so things just run a lot smoother that way.

0:19:30.1 Chris Dohrmann: So we’ve talked about the outside stakeholders, you know, so each one of the teams that you have to work with to get a successful year end done. Is there anything that you do to look back on the plan or plan design or, you know, anything like that to say, if we did this or if we changed this part of the plan? I don’t know, FMV, vesting dates, anything to make sure that they’re not conflicting with your end process? Or is that something that you try and do at a different time of the year?

0:20:03.2 Georgina Lai: Well, it’s always good to kind of review what’s gone well over the year and what hasn’t worked out. The tricky thing about equity is once you’ve kind of built things into the plan, they kind of stay there for the life of the plan. I remember we had say RSUs when we first started granting RSUs at a private, well, we were a private company at one of my prior employers. The RSUs vested on the first of the month, which doesn’t work out well when you’re trying to do month end, quarter end sort of closed, right? So we had, I think, a year or two of those RSUs that vested on the first of the month that we had to live with until they basically fully vested. So those are kind of tricky unless you’re willing to, the company and the accounting team are willing to modify that. You might be able to look at some deferral provisions within your plan that might be able to defer the vesting until maybe the middle of the month so that you don’t have to bump into the month end process. But with that though, you have to balance the optics for the employee.

0:21:19.1 Georgina Lai: Are they feeling, well, now I get a worse stock price because stock prices are always lower in the middle of the month. Whatever excuse they’re going to make for not wanting to change that. So there’s a lot to think about there, but it’s also good to kind of say, okay, that didn’t work for us. Moving forward, let’s work with a comp team. Let’s work to figure out what would be a better system in order to streamline the operational aspect of equity administration. So it’s always good to kind of take stock of what has been working, what hasn’t been working, and it might be the time to socialize the thought of maybe tweaking your program a bit. Maybe the chosen purchase date of your ESPP could use moving a day or two out or, you know, backwards. So maybe that’s time to kind of go, hey, this has been the issue. We’ve been noticing now that we have this new ESPP program, the purchase date kind of doesn’t align with XYZ. It might be time to kind of socialize that and work on a strategy to maybe tweak the program a little bit or, you know, vesting dates and whatnot. Because again, sometimes blackout overlaps with some of these dates and that’s not a great experience for the employee.

0:22:37.7 Chris Dohrmann: And I think sometimes the plans are either carried over from other templates or things like that. So it may not be completely compatible with your plan. So I think raising the issue is a good idea.

0:22:49.9 Georgina Lai: Absolutely. Or if your company has been active in M&A, what if you kind of inherited this other company’s stock plan that didn’t change vesting or whatnot? So again, it might be a good time to kind of look at it. And again, I always like to do postmortems on big events, either vesting events or maybe ESPP purchase or offering periods, taking notes throughout the year, what’s working, what isn’t working, what you can tweak during the year and what needs a little bit more of a plan level tweak. Take note of that and say, well, here’s the workaround. Here’s what this workaround costs. And then quantify what it would mean to perhaps tweak the plan itself or defer the delivery date of the RSU vesting. So trying to quantify that so that the teams can come together and make an informed decision on whether or not to change the program a little bit or keep it as is and just do the workaround.

0:23:52.9 Chris Dohrmann: I wanted to bring up probably the largest plans most companies have is their employees start purchase plans. Are there any specific events that you should be looking at as far as the ESPP with enrollments might be possible, purchase dates or anything, especially a purchase date that might be done at the end of the year on New Year’s Eve? All of those pose some really unique problems. Have you found that or ways around that?

0:24:21.3 Georgina Lai: Well, that’s it. Ways around that. That is when I… That’s a great question because, yes, when sometimes you inherit a plan where the purchase is on the 31st of December and the following day is a market close day. And some companies do a sell to cover for their non-US employees. So it’s a challenge to administer those kinds of plans. So yes, those are the plans that you kind of want to look at the pros and cons. Sometimes, unfortunately for us equity professionals, it’s very much a, we’re going to just have to live with this because they don’t want to change it. So what are your workarounds? What can you document? What can you streamline and work with your brokerage, your internal teams, the accounting teams, the payroll teams, because it all affects them, right? With purchase dates that aren’t necessarily ideal. But from the employee perspective, I always think it’s good to perhaps pull them. Every year I feel the HR team pulls them on the benefits and whatnot. Make sure to include the equity programs in there, your ESPP programs, see what is working for the employees and what doesn’t.

0:25:45.1 Georgina Lai: Because oftentimes the employee’s voice speaks the loudest and might be the impetus for you to be able to improve your program because the employees don’t like having a purchase at the end of the year, for example, because it complicates XYZ for them. So definitely pull your employees. But the other thing I like to do to kind of draw attention to the equity programs, because especially out here in Silicon Valley, equity compensation is such a large part of people’s compensation, is to partner with the HR and benefits team to basically have a booth, a presence of the equity team there along with all of the other benefits providers so that you might be able to socialize your ESPP for some of your newer employees who might not know what an ESPP program is, so that they have pamphlets, have education, tell them the equity team has office hours that you can just step in and ask them any questions, things like that to make sure that they understand that their equity compensation is a large benefit to them as well. It’s a great opportunity for creating wealth, especially if you have a really robust ESPP program.

0:27:02.5 Georgina Lai: So truly leverage the attention to the benefits week, an open enrollment week that HR does, and piggyback off of that to provide additional equity program information and education. But with that as well, especially when you have an ESPP program, don’t forget to make available recordings about the program or potentially lunch and learns ahead of an offering period. Again, to make sure that employees are aware of this benefit and that they have to take action in order to participate.

0:27:38.4 Chris Dohrmann: Great. And so just to recap, because you’ve been extremely insightful in this conversation, we talked a little bit about data integrity and audits. Then we talked a little bit about checklists. Then we talked about team building and basically making sure that you’re working with the other teams. And then lastly, what worked well and what didn’t work well? Was there anything I left out?

0:28:00.4 Georgina Lai: No. Well, no, but I don’t think I emphasize where the postmortem is also helpful is your business partners, your internal business partners, right? Also checking with them. Is my checklist working out well for you? Is delivering reports to you on day three of close appropriate? Do we need to move that up? Or I’m overwhelmed right now with all the things that I have to do for month end. Can I move it on day four? So again, also checking in with your business partners where you are the source of data for them, or you are a potential roadblock for them to getting their work done. Also check in with them. What’s working with the system you have now and what isn’t? I think helps them as well, because I’ve worked with some teams where certainly they won’t necessarily speak up. They’re just like, oh, this is just how I get things, right? I once worked with an accounting manager who just accepted, this is just the report I get. And then I have to do pivot tables and I have to do this, that, and the other. And I looked at him and I said, you know, I can build you a custom report that has all this information.

0:29:10.7 Georgina Lai: Why don’t we iterate on a report that works for you? So you don’t have to do these pivot tables or VLOOKUPs to get the information you need. It could just be all inclusive on this one custom report that I’ll know to run for you every month end. And he was just like, I didn’t know to even ask that. So again, you can provide so much value to your business partners if you just talk to them and ask them, you know, in an ideal world, what would work better for you? And so then you can show your value by helping them find solutions to smaller pain points for them, but surely pain points that would, you know, take up some of their time. And it also allows you to work with your service providers closely to go, hey, we need an enhancement to this report. We need a tweak to, you know, this output or what have you. So again, working through a lot of these issues helps make your team valuable and helpful, but it also can help out your service providers be better service providers.

0:30:17.9 Chris Dohrmann: Excellent point. That’s the way we’ve always done it is the enemy of progress and innovation. And by instituting communication, you’re basically dropping down the walls that are put up when somebody says, that’s the way we’ve always done it. I just want to say, Georgina, thank you very much for joining me. Your energy was electric and your expertise is always appreciated. Thank you.

0:30:40.4 Georgina Lai: Thank you, Chris. Anytime.

0:30:42.8 Chris Dohrmann: And that brings us to the end of the episode for Prosperity at Work from J.P. Morgan Workplace Solutions. Thanks for listening. If you’ve enjoyed this episode, we hope you’ll review, rate, and subscribe to J.P. Morgan Workplace Solutions Prosperity at Work podcast, available wherever you get your podcasts. You can find more insights on equity compensation, financial wellness, and more by following us on LinkedIn or over at globalshares.com. The Prosperity at Work podcast is produced by duspod.io for J.P. Morgan Workplace Solutions. Until next time, that’s Prosperity at Work. Bye.

Chris Dohrmann  00:00

Chris, you’re listening to prosperity at work. From JP Morgan, workplace solutions, the podcast all about equity compensation, financial, well being and more. I’m your host. Chris Dorman, in this special episode, we have Dexter Tang, global equity manager at Google. Dexter. Welcome to the thanks for having me. It’s great to have you, and I really appreciate it. So tell us a little bit about your background and how you started.

Dexter Tang  00:27

No one actually graduates and say, I’m going to be an equity professional. When I graduated, I never thought I would end up doing what I do today. So I started my journey in the world of accounting. I always love numbers, so numbers is my thing. And when I graduated, I started my career in in the area of tax. I picked tax as opposed to audit, which is another common route for accounting graduates. They’re both very boring, but I picked a less boring one, which is tax. So I started my career in the whole world of global mobility. So I was in one of the big accounting firms. So I was in PwC. I’m from Malaysia, so I started my career there, and then I started off for about three and a half years, and then I moved over to Australia. So I decided to migrate. I moved my life and moved with PwC, and I started to work with PwC in Australia. And then whilst I was in Australia, Google became one of my clients. So I manage all the Global Mobility Program and all their employees. So Google became one of my key clients at that time. And fast forward, four years later, Google came knocking on my door with this amazing opportunity to be in part of the equity team. So equity has always been a subset of what I do in global mobility. So when you do global mobility tax, you always need to know a little bit of equity. But now shifting to mainly doing equity programs is definitely one of my biggest career transition, not only from a career perspective. After that, I had to relocate to Dublin in Ireland. So I moved from Australia to Ireland, and I’ve been at Google, and I’ve been in Ireland for since 2019 so by next year will be my seventh year. So it’s been, it’s been a journey. Congrats.

Chris Dohrmann  02:22

So let’s, let’s bring this right up to date. For those who don’t know you, tell us a little bit about what your current role at Google encompasses.

Dexter Tang  02:31

I have fun. That’s what I do. Nah. But seriously, you know what I do is, firstly, I manage the international compliance and operations for equity program. That’s about more than 62 countries globally, and also 40% of our global population. So 60% is still in the US, but 40% so scattered all over the world. So that’s the first area that I take care of. The second area I take care of is related to, that is education on all these key markets. So we need to make sure, like all our participants and our employees, they are educated on their equity plans, what they mean to them, what is what is it in for them, and also all the taxation implications from having all this equity. So that’s the another exciting thing that I always do, which is education. I’m also leading all the global Help Desk and experience efforts. So whenever employees have queries, I have an awesome team that helps me manage all the queries. So that’s one of my other big projects that I worked on six years ago when I first started. So in 2020 we built a team to help us manage all employee queries, so that something is kind of like my baby. Until today, I still lead it from a strategic point of view. And then another thing that I do is also manage vendors, so we manage all our stock administration, our brokers. Then finally, of course, you know, as part of Google, we continue to expand. So I’m also responsible for all any new country enablement. When we set up a new equity program in a new country,

Chris Dohrmann  04:09

I feel like a kindred spirit, because I had run a help desk as well something like 20 years ago, but I’m sure it was not near the volume that you’re handling.

Dexter Tang  04:18

Well. I always say volume is one thing, but I think when it comes to a help desk perspective, I always use my experience in creating this because I always feel like I’m a very tough customer to please people know that people who are my vendors will know that, because I always expect really high standards of delivery and deliverables and service. So that’s how I train my team, is to always remember that you know that kind of thing, and then, more importantly, as well, when it comes to creating a team like that, you want to always remind them they are not just robots following steps and do this, answer this, but really helping these people appreciate what they do and find. Meaning in their job, and I find that that’s always one way to build a team like that, because when they find meaning in their job, they want to serve their customers.

Chris Dohrmann  05:09

It may sound those if we’re in the same room, but I’m in New York and you’re in Europe, so in two of the probably most regulated areas in the world, compliance must be a huge part of your work, and that’s understandable given the sheer scale at Google and the number of employees all around the world. Tell us something you’ve learned about compliance on within your role.

Dexter Tang  05:31

Now, I think, as a tax person myself, I’m genuinely interested in compliance. I think that’s the first thing that I feel that I’ve learned about myself and why I thrive in this particular area of compliance, because I’m genuinely curious with the requirements. And if there’s a new requirement, I’m always curious about what is it all about? Going through the details, and I partner with our tax partners and vendors to help us with this. So I think curiosity and interest, genuine interest, in taxation and compliance, is, firstly, you need to have that. And then secondly is, you know, when I mentioned tax, tax partners or vendors, you need to have someone that’s reliable, that you can partner with effectively, that you can trust that knows what you want, that knows what kind of standards or the way that you want them to advise you on. So that’s the other thing that I’ve learned, and then to help you to succeed in the area of compliance, I feel that you also need to have a genuine intent in really wanting to know these things. That’s where it ties back to the curiosity. If you just got to work in this role and just going through without really having the right, genuine intention to really be curious about area compliance, this is a very dry topic to go through, so I don’t think you you know, you’ll enjoy this role. So what I’ve learned is that if you’re excited, as much as I dislike to admit that I get excited about taxes and compliance, but it is something that I truly find joy and passionate about, and I think that’s what helped me. And then the final thing I would say that I’ve learned in area of compliance is, while you have reliable tax partners and vendors, I will never take what they say at face value. I always question. I always dig deeper, because, again, I’m genuinely curious. But also I’m not just, you know, relying on what they say. I challenge them sometimes, in fact, so you know, if that’s one thing that I feel that you need to to also do because you know your company the best. You know your programs the best, whilst your your your vendors will advise you from their perspective. But again, you know your program and how it impacts your program the most, and you need to sometimes challenge and not take everything at face value. I think another that’s another key learnings.

Chris Dohrmann  08:02

May I just shift gears just a bit and ask if you’ve seen any emerging trends in the area of compliance? You know what’s keeping you up at night? You know worrying about what’s coming down the road.

Dexter Tang  08:14

The joy self compliance is that it changes all the time. And then when you’re managing an equity program over more than 62 countries, you always have to be prepared for a change. Sometimes the change can be sudden. Means you have to pivot very quickly, or you and you know the change is coming, and then you got to strategize, and depending on how critical those changes are, I think how would you then partner with your local leaders, local HR that you know, to kind of explain the implications that may impact our local employees in the particular jurisdiction? And I think that that’s what keeps me up at night is really the speed of change that comes every single year. And again, when you work in so many countries, the changes can come any time of the year, and to a point where sometimes you are late in the game, where you actually the change has been implemented, and you only find out later. So it’s things like that, things the speed of change across the world is one of the things that you know keeps me awake. Some of the things I think, is also as your equity programs and your company grows, your reporting gets more and more complex, your program gets more complex. But you don’t get the privilege of growing your team all the time, how do you leverage automation and AI to keep helping you to scale because you need efficiencies, and I’m glad to be in a company that really is in the forefront of the AI revolution. So we are quite lucky with that, but we also need to make sure we utilize all those tools and to. To be more efficient, because when your programs get more and more complex, volume gets heavier, your compliance requirements still need to be met, and also the accuracy and completeness of your reporting needs to be at your top game, and especially in a big company like Google, you’re constantly on kind of like the radar. So how do you make sure your reporting is absolutely clear, accurate, complete? It’s always again, on top of my mind all the time. How do we keep getting better whilst also being really efficient with it? So you need to validate. You need to make sure they’re all right, and then find the fastest way to do it. So I think that’s another key one that keeps me up at night.

Chris Dohrmann  10:45

I’m glad you mentioned that, because I heard somebody the other day refer to AI as something that helps eliminate the no joy work. And I found that fascinating, because you’re also based part of your role also focuses on operations, which is all about efficiency and keeping people focused on their objectives. So how did, what does that look like in your role?

Dexter Tang  11:08

So a key a few examples of what, what my team does from an operations point of view is, you know, we obviously do our monthly grants, which is very common for equity programs. We got to validate vesting schedules and making sure like all of them is correct when we load them into the our administer administrators website. You know, payroll delivery is key to our day to day as well. Like every month, when we have vesting events in some countries, we need to report them through payroll So, and it’s huge, large, large, large volume of transactions across, again, many, many, many jurisdictions. How do you then work on that? So we work on all those operations as well. So with these two alone, you know, delivering it is one thing. I think, improving it constantly is one of my continuous improvement is always on my mind. And again, with AI and automation, I know these two words always comes a lot these days when you talk to any, anyone really, not just in this industry, but in particular for this industry, I feel like it’s still very underutilized, if you ask me, and I myself, am trying to educate myself more and more. And again, I am lucky to be part of a company that champions this. But also we are given a lot of tools at work that we built in house, and I think I’m trying to leverage them more and more on how I can improve all these operations again, to scale, to anticipate as your company grows, your comp your progress gets more complex. How do you use AIs? I always call it as my sidekick, you know. So so I always look at AI as some another thing that I can train to help me in my day to day role, and certainly a few things that I’ve done so far that is really amazing, that I can’t believe we’re living this day and age that can do that.

Chris Dohrmann  13:10

I also saw a data point that says only 9.3% of US companies are using AI. And I think that’s rapid compared to when it actually came along. Because, I mean, even talking about things like the iPhone, or talking about things like even, you know, the laptop, where, you know, people have now been able to do that all over, I think the 9.3% adoption of AI, I think, is great, because it shows that people are looking forward to it. What I think we, you know, the objective that you know your your operations, and using the efficiencies of AI as your sidekick, and much I want to just shift into what’s your approach to measuring the effectiveness of your equity plans, you know, the ROI, because I, you know, I think some of the tools we talked about are there to actually give you some more data points.

Dexter Tang  14:03

Yeah, I feel like, when it comes to a broad based plan in a lot of different tech companies, ROIs is very difficult to measure. You know, unlike programs like, let’s say, if you have an espp, for example, that’s how you measure with the participation rate. But when everyone gets equity in a company, how do you measure the you know, really measure it? For me, I think the easiest and most obvious one is retention. How much you know your employees will stay for it, and if you give a retention grant, for example, will it work? I think that’s the kind of measurement I would I would think for a broad based plan like that at the same time, another possible way of measuring ROI is, you know, really leveraging data analytics to really see the behavior of your participants. Are they holding to their stock? Stocks? Are they selling their stocks? How long are they holding? And all these things can also help really measure how much people appreciate those stocks. Another extreme, one I always joke about is take it away and you’ll see if they like it or not. So there’s another way to measure ROI.

Chris Dohrmann  15:18

Though you’re an expert on technical matters, you know, just It’s evident that you’re personally, very people focused. So you’ve said people’s stories drive advocacy for others. Have you used that in your role? Give us your favorite example of that.

Dexter Tang  15:32

I think, over the years, what I’ve learned is that everyone has a different way of doing things and the way they they live. What may be right to you may not be right to me, because we have a different upbringing, different background, different culture that we grew up in, and that always helps me to appreciate those differences, you know. And I think coming from, you know, from a Asian background, and I’ve lived in many countries that, not necessarily that I feel belong sometimes, and I have to fit in in a way. I think that’s what drives me to advocate for all those of more of an inclusion perspective and and, and really understanding people’s background and why they are who they are, you know, and how I use this in what I do at work is through, you know, just a simple example on on dealing with my participants, because at the end of the day, when we are operating an equity program, your participants or your employees are your customers. So the way I think about it, how do I want to understand my customers? Is, I want to know, you know, if they’re escalating or something, or complaining about something, or they’re asking for something. Different countries that I look at have different needs, and also it helps me understand, why are they thinking this way, or why is this an issue for them, but it’s not an issue in another country. So those are what I call different stories of different people, because everyone in different country has different way of being brought up in their culture. So that’s one way I look into it, and it helps me appreciate it helps me respond differently. And also, when I think about global programs, it also teaches me of how to educate them differently. So when it comes to education, I also use that the way I educate someone in France, it could be different to the way I handle in any countries, in Asia, in India, for example. So because different people would have different style of learning, and that’s what I always use that to, to gage my my my audience. So even within the country or within a company, an engineer versus a salesperson versus a finance person is very different. So the way I explain equity concepts and taxes, an engineer could understand technical terms, but a salesperson would prefer a simple analogy that they can relate to. So how do you tackle that? Know your demographic? So London, for example, has more engineers, so maybe I do it more technical, even Dublin has more salesperson. Then I strategize my education strategy a bit different any company at Google size and scale needs the right partners.

Chris Dohrmann  18:15

What do you have in mind? Because you said you manage your vendors for plan administrators, and what are the must haves.

Dexter Tang  18:25

So the one thing I always advocate for, for plan administration providers is you have to have a more global mindset, because you you your customers, your clients, are operating globally. What I find these days, or at least historically, is that, especially American providers, no doubt your client’s American company, Google’s an American company, but we operate in so many countries globally. How do you create a product or improve a product? It has to have a global mindset, not US centric. And I think that’s one thing I always want to advocate for, and it’s because I’m also a non US participant. So I know the pain, I relate to it, and that’s how I continue to advocate for that. So that’s one is a global mindset. The second one is really flexibility. I think, in a financial industry, we are so used to, you know, rigidity, and this is how we do it, kind of principles. But I feel providers now need to really find ways to improve their platform, their technology, to really meet their clients needs quickly, very quickly and flexible enough to give me, let’s say, for example, customized reports that I need because many different countries requires different things. So it might work for the US doesn’t mean it’s going to work for France or it doesn’t work for China, you know. So I think having that flexibility to your platform. Form again, you start with global mindset. Then you will, you will, then know how to get there, right? So that’s the second thing is, how flexible your platform is. And I think the other one is, again, going back to the global mindset, is about thinking of from your participants point of view. You know, I honestly feel, till today, when I sell, if I want to sell a share in my on my broker platform. Oh, my God, the platform is so complex to navigate. I think it’s just a historical thing, like years and years is it has been like that, and you see all the new Neo banks, or the new type of banks that that’s coming up, they make it so easy, so the participant experience is whole different. Like, like, when I use, I don’t know in the US, whether you have this, for example, in in over here, or like, Robin Hood, maybe you can relate to that Robin Hood. Why is Robin Hood so big? Because they know their audience, they have an app that’s so easy to use, easy to buy shares, easy to sell shares. And I think you know, providers need to start thinking about that. How can you know your audience and make it easy for them to do all these things without, like navigating and trying, like a maze, to go through the Navigating the account?

Chris Dohrmann  21:20

What are the biggest pain points for big global publics when it comes to running your employee equity program? You know, use as simple as time differences to whatever you decide to bring up.

Dexter Tang  21:31

For me, running a big program globally like that is really appreciating again, the multiple needs of different jurisdictions and local, local needs, you know, country specifics, you Yeah, in other words, you in different countries have their own ask. And when you’re running global plan, and especially for an administrative and operations perspective, the more standardized we do it, the better, right? Operations is easier, but there’s not necessarily, again, 111, size doesn’t fit all. So the challenge is, for me, is, how do you meet local needs as well? Like certain, certain countries probably have a, what they call a qualified plan that will may benefit them, but when you’re running a global plan, you can’t be running a lot of different local plans either. It just doesn’t work that way, right? And you you got to think about equity, you got to think about administrative challenges. So all of these things really is. One of the big, big points is, how do you, firstly, meet those needs, or Secondly, work with those countries to make them understand why their needs cannot be met, and how can you work with them to really influence that decision? I think, to me, that’s always the big pain points.

Chris Dohrmann  22:51

And I think finally, I’d be remiss not to bring up perks, and Google has been famous as a pioneer in instituting perks in the workforce and supporting a very culture that embraces the fact that their people, your people, are probably your most important asset.

Dexter Tang  23:09

Yeah, look, we, I’m not gonna lie like you know, as a employee myself, it’s hard sometimes to think about what’s live outside of it. You know, you know, we are given all these things. We have great perks, benefits, our competitive salary equity. And to me, all these things are given to us with one goal in mind. They want us to focus on making a difference and focusing on our jobs, so that all these small little frictions in our life, like thinking what to eat for lunch doesn’t have to be an issue. And I think for me, that that really helps me to focus on my job and really then helping driving value for the company and and that’s, again, what I do constantly at work, is trying to think when, how we tie it, tie that message to equity offerings, right? And when you think about equity offerings, it’s all about share price, it’s about shareholder value. And when a company is successful, you write the success with the company. And to me, that’s always been the purpose of an equity plan. It’s easier to communicate that when your share price is doing well, it’s a little bit harder when it’s not doing well. But the lucky thing, I think for us, is that, at least for me, for the past seven years, definitely we’ve seen a lot of growth so and then you help to then help employees to focus on continuing to create those values so that we can continue to be more successful in the future.

Chris Dohrmann  24:37

So we are almost to the final lap here, and what we do usually at the end of the show is to do a quick fire round. So I’ll ask a couple of quick questions, and you can give us first things that come to mind, and you know, we can see if we have some fun with that. So the first question is, what are the top three things you can do to get people engaged in a stock plan fun?

Dexter Tang  25:00

Simple and relatable.

Chris Dohrmann  25:04

I love that you said fun, because people learn by stories, and as soon as they’re having fun, they are all in Oh,

Dexter Tang  25:11

I’m I’m big on that, like every time I run education sessions, I challenge my tax advisors. You need to be more fun because you sound like you sound like you don’t want anyone to be here.

Chris Dohrmann  25:22

So second, what’s the secret of good reporting and measurement, completeness and accuracy? What’s the biggest pitfall that stock plan administrators fall into?

Dexter Tang  25:34

Oh, that’s tough, underestimating complexity.

Chris Dohrmann  25:40

I think you’re right, because I mean, especially when you go back to compliance, what you first read sounds fine, but when you find out that the regulators have written something that you can’t produce, that’s when the anxiety, you know, levels up.

Dexter Tang  25:55

Yeah, that’s one. But the other thing when it comes to that is, where I’m coming from is under the underestimation of complexity is I feel like, for example, if your company just offer one type of plan, let’s say RSU, people think, Oh, how hard can RSU be? I think you’re underestimating because when I joined after that, like, hey, it is not as easy as you think it is.

Chris Dohrmann  26:18

And finally, can you name the top three rules that you have that have helped you run a plan, well, partner

Dexter Tang  26:25

well, you need great vendors to partner with. You hire well, because you need great team members. And then finally, always have the right tools.

Chris Dohrmann  26:35

Dexter, I want to thank you for your time. You’ve been so you know, energetic and frank with your answers. I really appreciate it. This was fun, so I do appreciate it. Thanks so much for coming on the show.

Dexter Tang  26:46

No worries. Thanks for having me.

Chris Dohrmann  27:02

And that brings us to the end of this episode of prosperity at work from J.P. Morgan Workplace Solutions. Thanks for listening. If you’ve enjoyed this episode, we hope you’ll review, rate and subscribe to J.P. Morgan Workplace Solutions, Prosperity at Work available wherever you get your podcasts, you can find more insights on equity compensation, financial wellness and more by following us on LinkedIn or over at globalshares.com where you can download our new playbook on equity compensation program communications until next time that’s Prosperity at Work, bye.

Chris Dohrmann  00:00

Hello, you’re listening to Prosperity at Work from J.P. Morgan Workplace Solutions, the podcast all about equity, communication, compensation, financial, well being and more. I’m your host Chris Dorman.

In our recent Workplace Solutions equity compensation administration survey, we found that 47% of companies found that communication was their main pain point. Great equity compensation plan, communications are all about what makes people tick and how to trigger the behavior you want. Today’s guest is perhaps the top expert in that game, Jeff Kreisler, head of behavioral psychology at JP. Morgan, I got a chance to pick his brains on how to motivate people to engage with their rewards. Jeff, thanks for joining us on the show. Thanks for the invite. I’m going to let you do your own introduction, because it’s extensive, and I I’m sure I’m not going to do it justice. So please tell us what you do and what you’ve been doing with JP Morgan.

Jeff Kreisler  01:04

Sure, happy to do so. And I’ll give you the short You’re not my therapist version of my background. My name is My name is Jeff Chrysler. I currently serve as the Global Head of behavioral science for JP Morgan Chase, and I’ve recently realized that, since we don’t have offices on any other planets. I’m also the galactic head of behavioral science. So for anyone in their company that is, like the Global Head of HR, you’re also galactic. Anyway. So we’ll talk more about what behavioral science is and how I think it’s useful for all of the audience here. But as far as my background and how I landed here, I went to Princeton, I went to law school, and then, as most people do, I became a stand up comedian for a lot of reasons, and one of which was because the stuff I studied in economics and finance in Princeton and in law school was not how I saw people really acting right. We didn’t really follow the rules of supply and demand or legal structures. We acted irrationally. We acted nuts. And as a comedian, I was like, Hey, look at these crazy things people do. And then eventually I stumbled in behavioral science, and they said, Yeah, this is why, and this is what we can do about it. To shorten the steps between I through comedy, I was always interested in this hypocrisy, or this way that we acted against our own interests. I ended up writing a book that got in the hands of a man named Dan Ariely, who wrote predictably irrational, one of leading thinkers in the field. We did several projects together, and the relevant one is we wrote a book together called dollars and cents, which is available in 22 countries, a best seller, 99% because of his name attached to it. But nonetheless, it sort of gave me the opportunity to use my skills in communications and through comedy and all the media work and TV, everything I done, I said, I want to advocate for this, for individuals, families, communities, organizations. And I ran a platform called people science for many years that was a communication between the practitioners of the researchers of the science and those that try to put it into practice, both public and private industry, because it’s new. It’s really only been in business world for the last, let’s say, 10 years at this point, and then I had an opportunity building off of that here at JP Morgan, and this is where I am now, excellent.

Chris Dohrmann  03:24

I’ve heard you talk about behavioral change, and that’s the dream for equity administrators and, you know, and that’s what at workplace solutions we’re focused on. So getting employees to go from, I’m not really sure what this equity means. And, you know, I hope it works out to be fully engaged and have some level of understanding, or at least know what the trajectory is. Is the goal, where can a non behavioral scientist start with this? You know, how can you get it in the hands of the people that are actually trying to do this, and give them a goal, and, you know, a plan.

Jeff Kreisler  03:59

It’s great question, and I’m going to ask your audience to indulge in a few minutes, to step back, because there is a framework that’s well proven that we’ll address. It’s called B equals m, A, P. We’ll get to it. But before, I think there’s a couple sort of core principles of behavioral science that are worth keeping in mind for this context than any first, as many may know, behavioral science is a study of how emotion and psychology impact decision making and behavior basically. Why do we and those that we care about do the certain things that they do, and what if anything can we do about it? And it’s not magic. You can’t just snap your fingers and have things happen. But hopefully it nudges to use a term of art people to sort of open their mind for better decisions for themselves and those that they serve. It tips the scales a little, but there are two guiding principles that before we get into the framework, I think are important. Number one, making good decisions is hard. Making good decisions is hard. It’s hard for everyone. It’s hard in every context, be that financial, be that the workplace, be that in your family, it’s hard to do something now. All for the benefit of the future, whether that future is, what are my returns on my investment going to be in 40 years of my retirement, or how does this impact my career and the project I’m working on, or my team we’re trying to do something now, when we feel these emotions in the present for the benefit of the future that we’re not as connected to, and that future is uncertain, it can be scary. On the positive side. If we do a good decision, we’re serving our goals and our dreams and what we want to achieve. But all that stuff is really emotional, your goals, your values, your legacy, the uncertainty. And so when people are making decisions on a day to day in the moment basis, they’re not thinking about the big idea. They’re thinking about like, I just want to get through this choice. They just want to leave that decision point and say, I feel good about that. That isn’t the good thing. Isn’t always the right thing. It’s just what feels good for a variety of reasons that my field has researched tons of we can talk about, but that’s our challenge as HR, professionals, managers, leaders, teammates, etc, is to make it so the right choice for not just our team and our bottom line before that person, that employee, the right choice is the one that feels good, is the one that is that instinctive, quick thing, because we confront the second big principle, and then we’ll get to the point of the podcast, and that is that we cannot change human nature. We can’t change people. We can’t change the underlying emotions and psychology and fears and excitement and motivations that make us and those that we work with do the things that we do. But what we can do, and I believe we have to do, is we can understand human nature, understand why we and those that we work with make the choices they do. What is it that moves them to make these decisions that are often undermining their own goals? And then when we understand that, then we create relationships, conversations, frameworks, tools, so that we help them use human nature for their benefit, instead of having it used against them. So instead of fighting to change people every time they make a choice, we work with who they are to get to the best outcome.

Chris Dohrmann  07:03

So let’s talk about motivations. What are the triggers for motivations, and which are the strongest when it comes to something like talking about equity and you know, more seriously, you know, or at least talking about it in a way that they want more information

Jeff Kreisler  07:20

Just to set the stage. B equals m, A, P is a behavior change. Framework, again, context matters. It’s not perfect, it’s not guaranteed, but it’s a nice starting point. B is the behavior that you want to get people to undertake, right? And by the way, behavior is a behavior. It’s not an outcome. In other words, a behavior is not I want to lose 10 pounds, it’s I want to exercise once this week. And same with our employees. It’s the specific choices so you identify that behavior, engage with your equity plan in this case, and that’s a combination of motivation ability and prompt. Motivation ability and prompt, working backwards, prompt just means a timely prompt, right? Tell me about my equity elections the week before I need to do it not two weeks later. Ability make it simple, lower the barriers. Don’t put unnecessary roadblocks in the way of me doing something that’s hard. And then ultimately, from my perspective, the biggest thing is that we talked about m motivation. Give me a reason to do this thing, even if it’s as simple as checking a box that you put right in front of me. You know, you can make the world’s most amazing red button, but if no, let me go back, you can make the world’s most amazing red button, but if nobody wants to push it, they won’t. And so give employees a reason to do that, to push that red button, to engage. And broadly speaking, you know, we think of intrinsic and extrinsic motivation. Intrinsic being internal, extrinsic being external. And most of the time, when we’ve designed incentive programs, try to get people to do stuff, we lean on extrinsic motivation external things that’s like reward and punishment, that’s basically money, right? A lot of ways, or far right? You work at this car dealership, you sell 10 cars this month, you get a $5,000 bonus. You don’t sell two. You’re fired. That stuff matters. It’s not irrelevant, right? It gets people to do stuff. But broadly speaking, if you take that away, they’re not going to still want to do it, right? They haven’t created a real drive to do it. And you have to have some of that intrinsic there. You have to have some baseline. But the stuff that gets people to really engage and give a little bit more, and to go deeper than sort of the bare minimum, is the intrinsic, the internal motivation connecting to a sense of purpose, a sense of identity, something that they want beyond just the money and and, you know, if you think about like money, anybody can provide money only You can provide something specific to that individual money is is universal. Everyone can hold it and everyone can get it. Everyone can give it a feeling. You know, I got to take my family on a trip to Hawaii because I hit my goal, and we have these amazing memories that’s unique. To circle back to your question about sort of, what are some of I don’t know if you use the term levers, that’s the term I use. Of the things that we should consider to ignite this intrinsic motivation, which is where my focus is again, the extrinsic the money, all that stuff matters. But let’s focus here on this extra bit. I like to think of a few things. One is sort of the basic human need for three things, there’s something called self determination theory. Don’t know that I say it so I sound smart, and it basically says that we are we get satisfaction, meaning happiness, contentment from three areas, community, competence and control. Community competence and control. I think of them as a three C’s. Community. We’re social creatures, right? We want to be part of a team. You’re working on a project. You’re trying to get people to do stuff. Are you engaged? Right? Everybody? It’s harnessing social proof, right? Some great research shows, hey, 72% of your coworkers have signed up for the equity plan before April 7. Do you want to join them? Right? That sense of being part of something is very powerful in a lot of contexts, and I would venture it’s one of the most powerful ways for that sorts of things, for in the research, to get people to engage in benefits that they’re sort of leaving on the table is like, it’s kind of a little FOMO, right? Everyone else is doing it right? Yeah, there’s, there’s nuance, there competence, that we’re smart, that we’re growing, that we’re engaged, that we’re doing, we’re using our mind. And again, you think in the equity space like this is the this is what the smart employees are doing. This is what the high achievers are doing. This is what people thinking about their career and their family are doing. In other words, I’m not quite hitting the framing the language, but it’s like tapping into that need to be doing the right thing and to be being smart and strategic and thoughtful and control is, I think, straightforward. It’s not bossing others around, though we’ve all worked with folks like that. It’s having autonomy over our own career, our own future, our own lives, our day to day, and like in the equity context, like, Look, you can’t control everything. I think these days you look geopolitically without having an opinion, it feels like things are out of control. Well, you can control what you can control, and some of that is how much equity you have in the future. The professionals on this call know the language better, but in other words, like, here’s an opportunity to do something smart that a lot of folks are doing to provide for their family, and it’s unique to you, and you can really take control of at least this one part of your life and your future. Now all those things, if you’ll indulge one more thought before I let you get a word in edgewise, while those are sort of a little the three different important categories, a lot of them feed back into a sense of purpose, a sense of identity and like that is one of the really powerful motivators. A lot of things. It’s like a question of, like, why are you making this choice? Who are you? What? What matters to you, right? Not the like, how much you get paid and what do you do? But like, Are you a provider? Are you an innovator? Are you someone who thinks ahead for their family, connecting to that bigger thing is so powerfully motivating. You know, Adam Grant, who, I imagine many people on this call are familiar with Professor Wharton, one of his favorite projects. He took people at a call center, people that there’s no autonomy. They’re following the script. It’s not pleasant work, and he gave half of them a letter. They were they were raising money for a scholarship, and half of them got a letter from someone who’d received a scholarship, describing how that had changed their lives. The other half didn’t get this letter. The half that got the letter essentially got something that said, this is the point of your boring, horrible work, of picking up phone calls and getting a reject all the time, there’s there’s meaning and impact in what you do. Those people outperform the others. So at the same work, Project script almost two to one, just because they knew there was a point to it. My other favorite sort of anecdote slash study, is that when they were building the space program, President JFK went down to the Space Center at NASA, and he met a bunch of people. And one person he met was a janitor. And he said to the janitor, hey, what do you do here? And the janitor said, I’m helping put a man on the moon. Now, the janitor cleans toilets and picks up trash room nerds, but in that moment, speaking to the president, he was part of something bigger. He had a purpose or reason to get out of bed when he fought with his partner in his car wasn’t working right? And if you think about like, we’re not asking when it comes to equity elections, you know, we’re to ask people every day to salute the flag. We’re asking them to, like, harness that one moment of thinking, okay, like what matters to me. What am I part of? And everyone can have different purpose, right? Doesn’t have to be the corporate mission statement. It can be our own mission. So I want to provide for my family. I’m a first generation with this opportunity. I want to retire at 50 like I whatever it is, like. I want to do this thing, like helping them connect to that sharing, again, that social proof of stories of. How others have thought about X, Y, Z, their family, their future, whatever it may be, that is really powerfully motivating, more so I would venture than that dollar, not that the dollar is a matter, but you can layer this on top of that, and that’s going to, I believe, get people over the hump.

Chris Dohrmann  15:16

Jeff, everything that you’ve said so far is fantastic. What I’d like to do is give the HR people, or the total rewards, or the compensation people listening to this, they’re always thinking, how to make it easier for the employee. What’s the secret of this? What enables them to give the employee agency?

Jeff Kreisler  15:34

I think it is, as you had indicated, making it easy on them, like in so many contexts, when you’re across from somebody, whether it’s a hiring decision, it’s designing an interface on an app, make it easy for them to keep moving forward, put remove as many roadblocks as the regulations allow you to do. You know, getting people the opt in is the or the default is to opt into something they can still get out of it, right? You never want to restrict their choices, but you make it so that the default is the right thing. There’s a many design elements. And if I can recommend a book, am I allowed to recommend a book? Yes, give me an odd cool there’s a woman named Amy Bucha, B, U, C, H, E R, wrote a book called engage, which has a fantastic look at like, probably 150 design tweaks, using behavioral science to kind of get people, you know, like on page one of a sign in and onboarding process all the way through page 10. And there’s just, like, a lot of things, little tweaks to make it easy for them. And I would say the same in however you interact with with your employees, like serve it up to them. Of course, my perspective layer on the why and the motivation, but don’t make somebody come into your office in the sub basement on Saturday afternoon, you know, like bring it to them at their lunch on Thursday.

Chris Dohrmann  16:47

Okay, so finally, let’s talk about prompts. I’ve heard about there being three kinds of prompts. Can you elaborate?

Jeff Kreisler  16:54

Yeah, well, the key to prompts is really having to be timely and again, sort of served up in a way that people will react to. And a prompt is just, I might call it a nudge. It’s it’s a suggestion to do something. It’s an email that says, Don’t forget your elections. It’s a reminder, hey, you have two days left to do your your elections. It’s getting to people at the right time when they’re receptive to it. Now you could there’s a whole science to drill down when exactly it is like this fascinating research on when do you send cold, cold call emails, right? Outreach, and it was like Thursday mornings at 1005. Is the best time for that. You don’t have to get that specific, but recognize, within whatever your organization is like, When are good and bad times? Like, are you in an organization that’s tied to the market? And so anything before four o’clock is going to get ignored. Are you an organization where people are working on the weekends, like think about the timing of those reminders and serve it up in a way that people actually will read the email and then move forward. That’s really the key. Is the context, the timing and the design, so that again, the prompts, then harness all that, make it easy and make it motivating.

Chris Dohrmann  18:09

Okay, now we’re going to move on to what we call either the rapid fire or the rapid response part of the podcast. And what we’re hoping to get is real, Top of Mind information from you and really and just not give you a whole lot of time to respond. But we’re not trying to, you know, make you uncomfortable about it either. So are you ready?

Jeff Kreisler  18:28

As ready as I’ll be okay.

Chris Dohrmann  18:29

What’s the thing that holds most people back from understanding their finances better?

Jeff Kreisler  18:38

I would say it’s this is an unnecessary $20 phrase, perspective on magnitude. In other words, I would never want people to be obsessed with every financial decision that’s just not healthy and it’s not productive. However, we should be obsessed about certain ones, the ones that have a big impact. What people tend to do, though, is the reverse. We stress out about like, the $8 latte, and we don’t throw up our hands when it comes to a mortgage or a college loan. You know, imagine you’re getting your renovating your home for 150 grand, and your contractor goes, Hey, for $5,000 you can get a marble countertop. And you’re so overwhelmed, you’re like, Fine, whatever. It’s a drop in the bucket. Then you go to the supermarket and spend 10 minutes stressing out over 15 cents per pound more for organic tomatoes, right? That doesn’t add up, but we can control that tiny little thing. That’s why we do it. And we tend to obsess over the little ones and not the big ones. And I would say, try to flip that on its head, right? Obsess over the big things. Like it’s hard, I know that, but it’s worth it, because $100,000 has more impact and 10 cents every now and then check in on little ones. Right? Don’t just, like, willy nilly, spend five $8 all the time on the lattes. But like, don’t worry about all the time. Check in every six month and check those sort of recurring payments. But most of us tend to focus on the little ones. And I would say, flip that on its head, and don’t stress all the time. Stress on the big choices if you have to choose that moment to do so.

Chris Dohrmann  20:01

Perfect! When you’re writing messages for a big audience, what are the three golden rules?

Jeff Kreisler  20:09

Do you mean when I’m just sort of communicating myself, like a communication technique, or specifically about making better choices?

Chris Dohrmann  20:15

What a communication technique or making actually that prompts people to make better choices?

Jeff Kreisler  20:26

I would say that remembering that this is hard. I talked earlier about the big principles, like decisions are hard. Like listening as an audience is also hard. And like trying to simplify what I’m communicating, just as you might try to simplify framing a decision for folks. Likewise, the second principle, if you can’t change human nature, I can’t change what the audience is like. I can’t change that doing a talk at two o’clock in the afternoon that they’re gonna like, have a little lunch low so working with that, not fighting that, not begging for their attention. And then, you know what I tend to try to do, and I’m conflating both better choices and communicating to an audience. I think they’re relevant. I tend to try to put myself in their position. Like, who is the audience? Like, what do they want? Why are they here? What did they need? Not, What do I offer? Right? What? Not, What do I need? Not, What am I selling? But, like, what do they need? Who are they there? Just like in this, you know, for this podcast, like I got some background who the audience is. I may not have served it up perfectly, but I’m at least conscious like, this is not a bunch of salespeople or, you know, bank tellers. They’re in a different role. And a lot of times I see people trying to force others to get on their wavelength, where it’s better to try to get on the others the audience’s wavelength, and work with that.

Chris Dohrmann  21:44

So if one of the HR total rewards or equity comp people are writing a communications plan, what’s the first thing they should know?

Jeff Kreisler  21:54

Who is your audience and what do they want? Who is your audience? And ask yourself that question and answer without any reference to their money or their job title, who are the people you’re talking to? Right? Are they family, you know, head of a family? Are they entrepreneurs? Are they, you know, what, young risk takers? Are they near in retirement, like, who is what’s going to make them feel good about what it is that you’re presenting.

Chris Dohrmann  22:21

You know, in this communications plan, what are some serious don’ts if they’re writing this communication plan.

Jeff Kreisler  22:30

Over reliance on jargon and acronyms, just sort of, I don’t know what the proper approach is, is it assume people don’t know the acronyms, or just slow it down. But like, we rely on jargon a lot, and even in our closed circle of of like minded professionals and may have the same role like sometimes that just it slows the listeners down when the jargon and enough of it, can make it feel like there’s a wall between you and the audience. Unintentionally, it can just feel like there’s information imbalance. If you’re too jargon to keep it simple, if someone wants more detail, you know, you’re talking to a bunch of research scientists and they really want to know the great, then you can stop and provide that. Or you can, you know, certainly that’s what links are for when you’re creating something that’s that’s online. But keep it simple. K.I.S.S. Keep it simple. Silly. It’s not the word that’s normally used, but keep it simple silly.

Chris Dohrmann  23:27

Okay, last question, and I think you’re going to like this, because it harkens back to your introduction. Is there room for humor in this kind of messaging?

Jeff Kreisler  23:38

This is goes against improv, one on one yes, but supposed to be yes and yes, but it has to be authentic, and don’t force it. You can only be as funny as you can be. And I actually think where humor comes in is less about trying to be funny and more about just being authentic and genuine and vulnerable. And I obviously have a skewed perspective. My perspective is it the world and life is kind of absurd and funny, and so when I’m genuine and authentic, that’s the perspective I share. If you have a different perspective on life, that life is hard or life is beautiful and worth celebrating, or, you know, life is opportunity, whatever it is like, if you’re authentic, that will come through. I tend to believe that like that often releases some sense of humor, but don’t try to be funny, especially in the workplace, like the risk is not worth the reward of a poorly delivered joke, but be yourself and be in the moment.

Chris Dohrmann  24:34

Jeff, thank you for coming on the show and for making a topic that I think people are should be much more familiar with but is a little esoteric for them. On the on a day to day basis, you’ve made it very interesting and very understandable. Thank you so much. Thanks for having me. And that brings us to the end of this episode, a prosperity at work from JP Morgan, workplace solutions. Thanks for listening, and if you enjoy this episode, we hope you review. Two rate and subscribe to JP Morgan, workplace solutions, prosperity at work available wherever you get your podcast. You can find more insights on equity compensation, financial wellness and more by following us on LinkedIn or at globalshares.com where you can download our new playbook on equity compensation program communications. So until next time that’s prosperity at work. Thank you. Bye. Information provided in this podcast is intended for informational and educational purposes only. It may contain views which differ from the views of JPMorgan Chase and company. For specific guidance on how this information should be applied to your situation, you should consult a qualified professional for full details, see the show notes on your podcast player right now. The Prosperity at Work podcast is produced by dustpod.io, JP Morgan, Workplace Solution.

Lauren Jenkins  00:00

Welcome to prosperity at work. From JP Morgan, workplace solutions, the podcast all about equity compensation, financial well-being and more. And you can learn more about financial wellness and employee equity education with our new ebook. Check out the show notes for a link to download it now. I’m Lauren Jenkins, Executive Participant Servicing at Workplace Solutions.

Chris Dohrmann  00:18

And I’m Chris Dohrmann, Strategic Partnerships at Workplace Solutions.

Lauren Jenkins  00:23

All right, Chris, let’s talk about financial wellness. It’s been defined in different ways over the years. One definition I like is that financial wellness is being able to pay bills, manage expenses, save for emergencies, and feel confident about the future.

Chris Dohrmann  00:38

Yeah it’s not just about getting paid or getting rich, it’s about doing well with your finances,

Lauren Jenkins  00:42

and for that reason, it’s a huge consideration for many companies with an equity compensation plan too. And you can learn more about financial wellness and employee equity education with our new ebook – check out the show notes for a link to download it now.

How does financial wellness and educating people on it improve engagement and make your offering more valuable to employees?

Chris Dohrmann  01:02

Today’s guest has a very interesting angle on this topic. Bob Fritz is head of executive advisor at JP Morgan private bank, so he spends a lot of time talking about what makes top business leaders feel happy and secure with their finances, and he’s with us now. So Bob, welcome to the podcast. Thank you very much. What I wanted to start with is for the folks listening, I wanted to just have them. You know, if you could give us a brief rundown about what you do here at JP Morgan.

Bob Fritz  01:29

Yeah, thanks. I run the Executive Advisory Service for the within the private bank, and within that position, I’m, you know, frequently introduced by our bankers, really talented people to meet CEOs and CFOs and other senior executives at some of the largest and most profitable companies across the US. And we talk about their compensation plans, their benefit plans, how it impacts them personally and what decisions or elections should they be making? So that’s how I take up my day is really just meeting people and helping them kind of, kind of guiding them through their decision points and getting them to the place that they need to be, as relates to their comp and benefit plans.

So it’s very interesting to get really close and connected to senior executives. And they probably don’t do that too much, you know, during the normal course of their lives, but the conversations we have, we get them to that place, which is really kind of interesting to me, beyond just the technical comp and benefit plan stuff, it’s just interesting to get to know them on a personal level.

Lauren Jenkins  02:39

So Bob, let’s start with the big picture. We all assume that leadership and C suite level executives know everything about their equity and financial wellness, but that’s not always true. Is it?

Bob Fritz  02:49

No, correct? It’s not. It’s not always true. I mean, think about what a C suite executive is going through. They’re spending, like the vast majority of their time running the business as a CEO or CFO or chief operating officer or a division leader, they’re running their business. That’s their job, and that’s like consuming them most of their days. And then, of course, on the weekends, when they’re kind of off the clock, they’re want to spend time with their family and friends and do all those other kind of things. So while they’re, you know, really smart and experienced in it, they don’t spend the time to analyze their own compensation and benefit plans as much as they should. So I think the value we bring is helping them to digest those relatively complex issues, understand them as people, and guide them very efficiently and effectively towards the right decision. Again, they could spend like, whole Saturday afternoon trying to figure out what they should do on an equity plan decision or a comp plan decision, but if they can have somebody come into their lives and say, Look, this is what you need to do. Here’s the right decision for you personally, here’s where it sits, it fits and foots. With your personal financial planning. And if we can do that, like, effectively, in the course of like, 1020, 30 minutes, that’s what they’re looking for from the service we provide.

Chris Dohrmann  04:12

And you’re so right. I mean, equity is becoming even a larger portion of their total compensation. In the US, it’s probably approaching 60% and the rest of the world is probably, you know, approaching 50. So this isn’t something they can sleep on, right, correct?

Bob Fritz  04:30

I mean, it’s, it is it is everything they’re all about. It is they’re going to be their retirement plan. It is their wealth accumulation. If they don’t manage this the right way, it can lead to kind of some bad, you know, bad outcomes down the road. So if we can make make sure they’re making the right decisions at every stage of their career. And I think of it in kind of three stages. I look at it as the emerging executive that’s new to the C suite, that’s introduced to equity plans and deferred comp plans, and they come to us and ask, like, what is this all about? How do I think about this? How does this work in my overall financial plan, that’s phase one. Phase two. I think of it as the existing executive that’s been in these plans for a few years has accumulated wealth and has become a bigger part of their personal financial plan. And then the third phase, of course, is the exiting executive that is looking to retire or move on to another position or do something else, and have they made the right decisions around that, those comp and benefit plans so that they if they’re retiring? Are they taking the deferred compensation over a number of years? Have they thought about their equity accumulation in such a way that they’re managing that the right way as they retire, and can kind of reduce that concentration in their post retirement years and make sure that they’re locking in the wealth that they’ve accumulated over their executive experience. Absolutely.

Lauren Jenkins  05:52

Can you talk a little bit more about the impact that equity compensation can have on an executive’s retirement?

Bob Fritz  06:00

Yeah, look at as we’ve just discussed. I mean, I think that the, you know, the wealth accumulation and the equity plans, whether it be through restricted stock units, performance stock units, stock options that are granted to them, these are, you know, wealth accumulation vehicles. When you think about it, if you’re a private company owner, you know, it’s all in the company, and then at some point you have a transaction, and you sell off the firm to somebody else. And that’s how they accumulate their wealth. With public company executives. It’s all in the company benefit plans and their performance around that helps them accumulate, you know, wealth over time. And they’ve got to manage that wealth. It’s got to be, you know, it’s accumulation, and at some point it becomes management around that concentration of stock, just to make sure that they’re securing their own financial future. And that could be just, you know, at strategic times, maybe selling off that company stock and diversifying into other assets and kind of having a balanced portfolio. It could be through estate planning and other vehicles where they want to balance out their estate between themselves and their spouse, so they do some creative estate planning items there. Or maybe it’s gifting to, you know, family members, children, other family members, where they set it up such in such a way that they can gift the appreciation of the stock on a very tax efficient way down to the next generation, say their children or other family members. So and then, of course, there’s the charitable side of the world, where the accumulated stock over over a period of time, you have got a lot of appreciation in it. You’ve got charitable intentions. So you either gift outright to charities, or you establish a donor advisor, donor advised fund that will, you know, allow you to make a donation today, and then you can give the assets down the road. So kind of managing all of that in those three stages that I just mentioned, where you’re accumulating wealth, you’ve got the wealth, and where you’re thinking about maybe, you know, diversifying yourself away from the company’s die

Chris Dohrmann  08:04

So Bob, just to go back to what you started with, many of these executives, with maybe the possible exception of the CFO, financial wellness, is not something that in the US we do a good job of preparing people to address, and I think people need to be much more comfortable admitting that. And you know, how is it that you can set these folks up so that they can feel comfortable and productive by learning how to be the best advocate for their own financial wellness?

Bob Fritz  08:27

Yeah, look at, I think, whether you’re the CEO the CFO or anybody else in corporate America, you know your strengths and weaknesses. And while, if we take a CFO, for example, very obviously sharp on numbers, they know what they don’t know, and the complexities of a comp and benefit plan is something that the CFO is going to realize. You know, again, to my earlier point, you could, you could analyze this all weekend long and try to come to right decision. Or you can ask somebody like myself or your JP Moore. And banker to help you and navigate that in a very effective way. So I think people, the clients that I’ve met over 30 plus years will come and say, look, and I understand the basics of it. But what should I do, like, what are the specific intricacies of the plan that I should understand, and how does that impact me personally. How does that, you know, benefit my financial wellness down the road, so that I can make the right decision? You know, they realize that they know a lot. They’re very smart people, but if they can have somebody kind of efficiently and effectively guide them to write the right decision, that’s where they want to be.

Lauren Jenkins  09:33

Now we’ve heard you speak about the importance of timing around stock options. Can you expand a bit on that here?

Bob Fritz  09:38

Yeah, I think, I think, because I’ve seen people exercise options over the years, there’s a couple of mistakes. You can do it way too late in the cycle. So a typical stock option grant that’s, you know, available for 10 years. People wait until the eighth, ninth or 10th year of an option grant. And there’s a lot of bad things that can happen to a stock option in those later years that has nothing to do with the company. It could be market driven reactions, or industry driven reactions, or something else that drives that stock price down. And you know, if you’re at you’re at the end of the extra expiration period, and you’ve got to do something. Now, I suppose you could always buy the stock through the option plan pay the taxes on it, but that’s a pretty large check to write between the option cost and the tax cost, and people are reluctant to do that. On the flip side, people will exercise too early in an option period. So the option invests over two or three years. It comes into some money. They see the value there. They get anxious about it. They want to exercise. And what they’ve effectively done is given up the free upside leverage, the free upside leverage with an option plan, and what you want to do is strike that right balance. You want to ride that option exercise ability as long as you can, without exercising too early or too late. If my rule of thumb, candidly, is if you’re in the second half of the option period, meaning your six or beyond, and the stock price has doubled, you should be thinking very seriously about exercising that option again. It avoids exercising way too late, where you could experience a big downturn in the stock and lose some value, and it avoids the exercising too early, where you’ve missed a lot of that free upside leverage in the stock.

Chris Dohrmann  11:29

Okay, I’ve already addressed the fact that most companies are starting to expand the percentage of equity in a total compensation package for executives. But is there something the company should be thinking of, because let’s just pick two options, whether it’s RSUs restricted stock units, or whether it’s, you know, stock options, as you mentioned, is there something the company should be thinking about when they decide which they’re going to choose for their executives. Yeah,

Bob Fritz  11:55

I think, I think in most public companies, in private companies, there’s a lot of emphasis on the stock option granting, which makes a lot of sense, right? You want to, you want to incentivize everybody to maximize the company value before goes, before the company goes public. So you want to, you know, tie everybody’s interest and abilities towards that stock option granting. So whether it be non qualified options or incentive stock options which have different track tax treatment. You want to, you want to emphasize that with large public companies, with our public companies, what you see commonly is a mixture of restricted stock units and performance stock units. Of course, the difference is restricted stock units. It’s just the it’s just the the time value of it. So it vests over two years or three years with a performance stock unit. There is a performance trigger in addition to that time vesting element where they have to meet certain revenue growth targets, or profitability or EBITDA growth or something like that, and it’s tied to that. So they’re if they’re granted 100 shares, that 100 shares could turn into either 50 shares, if that doesn’t work out the right way, or 150 or 200 shares, if they do perform the right way. So what we see with public companies is a mixture of RSUs and PS us, and kind of driving the right behavior by the management team to hit some sort of financial goal. And it could be kind of a two thirds, 1/3 mix. I don’t think companies do all performance, share granting because, you know, things could not work out. You know, nothing to do with the executive management team, nor do they want to just offer RSUs that all you need to do is just wait it out and you get paid out, you know, down the road. So it’s kind of a two thirds, 1/3 mix is what we’re seeing out there. Yeah. There’s

Lauren Jenkins  13:40

Also the matter of incentive stock options, also known as ISOs, often issued by pre IPO companies. Can you give a quick guide to those?

Bob Fritz  13:50

Sure, so ISOs are a bit complex, but they’ve really got some really interesting tax treatment to them. So if you think about non-qualified stock options and NQSOs, they’re taxable the minute you touch them. So if you exercise and sell or exercise and hold, you have an immediate tax consequence. And it’s an ordinary tax consequence in the US, taxed at 37% plus your State Taxation, so that that the minute you touch them, it’s immediately taxable with incentive stock options ISOs, the it is not immediately taxable if you exercise and hold those shares. So think about, you know, if you’ve got if it was granted at $20 a share, and the stock is at $40 a share, when you exercise that $20 spread is not taxable to you if you decide to exercise and hold those shares. And the advantage, of course, is that if you exercise and hold those shares for more than a year, you receive long term capital gains treatment on that on that stock that you received. And that’s very tax beneficial versus paying the ordinary income tax. The caveat to this, which makes it complex, is that when you exercise and hold an incentive stock option, share is not included in your regular tax but it’s included in your alternative minimum tax calculation. So that could produce an AMT for you, not they’re not in the current tax structure. There’s not a lot of people that are subjected to the AMT, but it is a factor, and clients should consult with their tax advisor around the exercise strategy on that to me, if you exercise an incentive stock option and hold it and you do trigger an alternative minimum tax, the AMT, it’s not the worst thing in the world. You’re paying some tax, but the AMT that you’re paying is in the form of a credit against future taxes. And I want to get too, too technical here, but you’re kind of pre paying some taxes that you’ll get the benefit of down the road. So ISOs, if you have them available to you, you should consult with your tax advisor around the right way to exercise the grant. But there’s some, some real benefits to this that, you know, clients should realize that’s available to them. And

Chris Dohrmann  16:06

Just, I want to just touch into that, because you’ve been very generous with your opinion, and it’s a very valuable one. So maybe as a bonus. Or the last question would be, what are the most effective ways that companies can ensure that their executives get the type of education they need to accurately appreciate and then handle the rewards that they’re being given.

Bob Fritz  16:28

Yeah, look at I, you know, I think companies can provide their executives with, you know, a resource around them that understands their comp and benefit plans thoroughly, which we do here, you know, understanding how the option plan works and how the other plans work, the 401 K plans, the deferred comp plans. You know the retirement plans overall, if you can arm executives with that kind of resource to them, that is very valuable. Because if you’re in the Human Resources area where you’re obviously designing and developing and rolling out different benefit plans, you want to make sure that the executives are taking advantage of them the right way. They understand them. They’re maximizing them. But unfortunately, in the Human Resources world, they really can’t be that resource around it, because they don’t understand the executives specific interest in their own personal planning. So if they can combine that, you know, rolling out of the of the benefit plans with some experts around it that can help the executives get to a decision and do it effectively and efficiently for the, you know, honoring the busy executives time. That’s the best thing they can do, is make sure that they’re, you know, arming the executives with somebody that can digest the benefit plans, understand it now realizes or how it affects the executive and how they can guide the executive to the right decision. That’s the best thing that they can do. Bob,

Lauren Jenkins  17:54

Thanks so much for joining us today. We really appreciate you sharing your knowledge.

Chris Dohrmann  17:59

Thanks, Bob, it’s been a pleasure.

Bob Fritz  18:00

Thank you very much. I’m glad to spend some time with you. I think it’s really interesting opportunity to talk about executives and how to serve them the right way and maximize the company benefit plans that are available to them.

Lauren Jenkins  18:10

And that’s it for this episode of prosperity at work from JP Morgan workplace solutions. And as

Chris Dohrmann  18:15

always, if you made it this far, thanks for listening. If you’ve enjoyed this episode, we hope you’ll review rate and subscribe to JP Morgan. Oregon workplace solutions, prosperity at work. Wherever you get your podcasts, you can

Lauren Jenkins  18:26

Find more insights on equity compensation, financial wellness and more by following us on LinkedIn or at globalshares.com where you can also download our new global equity compensation survey report.

Chris Dohrmann  18:40

Until next time that’s prosperity at work, bye. The information provided in this podcast is intended for informational and educational purposes only. It may contain views which differ from the views of JPMorgan Chase and company. For specific guidance on how this information should be applied to your situation, you should consult a qualified professional for full details, see the show notes on your podcast player right now

Lauren Jenkins  19:04

The prosperity at work podcast is produced by dustpod.io for JP Morgan workplace solutions.

This podcast contains general information only and J.P. Morgan Workplace Solutions is not, through this podcast, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. J.P. Morgan Workplace Solutions’ Insights is not a substitute for professional advice and should not be used as such. J.P. Morgan Workplace Solutions does not assume any liability for reliance on the information provided herein. 

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0:00:04.0 Chris Dohrmann: Welcome to Prosperity at Work from JP Morgan Workplace Solutions. I’m Chris Dohrmann. In this episode, my colleague John Bagdonas is joined by Joe Notaro from our partner Forvis Mazars. Together they’ll be taking an in depth look at IPO preparation process, financial reporting, equity compensation, internal control roadmaps and more. Any company that is preparing for an initial public offering will know there is a lot involved and hopefully today we can demystify some of the process for you.

0:00:34.1 John Bagdonas: I’m John Bagdonas, VP of business development for JP Morgan Workplace Solutions. And I’m delighted to be joined here today by Joe Notaro, Accounting Advisory Partner with Forvis Mazars. Hi Joe, thanks for joining us today. To start with, why don’t you tell us a little bit about Forvis Mazars and your role as an advisory partner.

0:00:54.2 Joe Notaro: Yeah, thanks John, really appreciate you having me. As John mentioned, I’m Joe Notaro and I’m an Accounting Advisory Services partner at Forvis Mazars and I’m based in the firm’s New York office. For those of you who haven’t come across the firm yet, we’ve had a busy couple of years. Three years ago, Forvis was created as a result of a merger of equals between two top firms here in the US. Not to stop there, last June, Forvis and Mazars combined, not only here in the US but we created a new leading global professional services network operating under a single global brand. So now to merger as the US firm is still separate from the international firm. But we believe it will allow us to drive collaboration and coordination across the firms to better serve our clients with international needs and be ready to grow with our clients that may have those international needs one day. As we approach the one year mark, we’re now the 8th largest accounting firm in the US and the 10th largest internationally with over 5 billion in revenues. We offer a full suite of solutions to our clients ranging from audits to taxes, system implementations, valuations and consulting services.

0:02:02.5 Joe Notaro: As I mentioned, I’m part of the accounting advisory services team. What we do is we’re the group at Forvis Mazars that helps with the complex technical accounting and SEC reporting issues. We specialize in business combinations, carve outs, debt and equity financing transactions, revenue recognition, lease accounting and stock based compensation matters. We also help companies with their SEC reporting complexities and have a lot of experience navigating the IPO process from start to finish.

0:02:31.7 John Bagdonas: Thanks Joe for the overview. And so getting to the topic at hand as we can all appreciate, an initial public offering is a hugely transformative event for any company going through one. I like to think of it in many regards as an exciting once in a lifetime event crammed full of twists and turns in many moving parts. And that’s why we’re so fortunate to have you to guide us down what I like to call the yellow brick road of capital markets towards the IPO Emerald City. Speaking of capital markets though, why don’t you share some of your insights and also explain the different liquidity paths that a company may take, such as an IPO, SPAC or reverse merger?

0:03:12.9 Joe Notaro: Yeah, and I think that’s a good segue to what we’re going to talk about today. So just as a reminder, we’re going to be navigating the IPO process specifically around financial reporting and internal controls. The webinar is really going to be geared towards companies that are thinking about going public and what you need to consider when you’re two years out, 18 months out, 12, six and so on, all the way to your initial public offering and beyond. We’re going to cover the key considerations companies should consider when preparing for an internal public office and provide an overview of the process, share some insight from experts who have navigated the challenges before, and also talked about some of the lessons learned from companies who tried to navigate the process without the proper resources and expertise in the room. The biggest takeaway you should take from this webinar is regardless of where you are in the process, no, you’re not too early to start thinking about these things. And as John teamed me up, I always like to start out with an update on where the capital markets are right now. First, a little bit of a history lesson.

0:04:18.3 Joe Notaro: So in 2021 there were 416 traditional IPOs raising $155.8 billion. A year later, this followed up with 90 traditional IPOs raising $8.6 billion. And really, since then, companies have been waiting to see when the window was going to open again. This was due to a variety of reasons. Interest rates were too high, recession was imminent, inflation’s out of control, geopolitical tensions led to investor uncertainty, and so on. And speaking of uncertainty, most investors preferred to wait and see until the results of the US Election played itself out last November. Despite all these factors, 2024 saw a notable increase in activity. In 2024, the number of IPOs was actually in line with the combined total number of IPOs in ’22 and ’23. While some viewed this as still a soft market, as it wasn’t in line with some early expectations or the historical levels of activity, we did see some encouraging trends. We saw an uptick in sponsor backed IPOs, but also an impressive return of 42% of sponsor backed IPOs after going public. We also saw an increase in venture capital backed IPOs to the tune of nearly twice as much of a raise in ’24 compared to ’23 and nearly four times as much of a raise compared to 2022.

0:05:42.6 Joe Notaro: It was very industry specific with healthcare and technology making up 61% of the deals and 49% of the proceeds. So flash forward to 2025. There is a reason to be optimistic. In addition to the solid aftermarket performance and a solid start to the year, the election is now behind us and the general consensus is there’s a pro business sentiment taking over with anticipated policy changes and favorable market conditions. With all these factors, there may be a reason to be positive that the IPO market will bounce back in 2025 and continue to be strong in 2026. We’re also seeing a growing backlog at companies that want to go public. For example, there have been companies who’ve been waiting for market conditions to improve, but been ready to go the last two years. Meanwhile, there are a lot of companies who are just starting to think about going public, realizing realistically that they’re still 18 to 24 months out.

0:06:41.4 Joe Notaro: First, although we are referring most of the time to the initial public offering, I wanted to highlight that there are multiple ways for a company to enter the capital markets, so some basics. In an IPO, the company is going to work with a team of underwriters to determine the offering price, file necessary documents with the regulatory bodies like the SEC in the US and market the shares to potential investors.

0:07:07.1 Joe Notaro: Another way companies could go public is completing a reverse merger with a Special Purpose Acquisition Company or a SPAC. A SPAC is a blank check company created solely to raise capital through an IPO for the purposes of acquiring an existing private company. A SPAC will raise funds through an IPO and then have 18 to 24 months to identify and merge with a private target company. The advantage is, because the SPAC is already public and filing 10Ks and 10Qs, theoretically it could be a faster avenue to go public for the private company and potentially less expensive.

0:07:44.7 Joe Notaro: A few years ago we saw a boom in SPACs. If you recall, it seemed like everyone had one. However, the last few years we’ve seen the levels come down to earth or return to normal historic levels. But then in 2024 there were 50 SPAC IPOs raising $7.6 billion, which was more than double compared to the prior year. So there are opportunities out there and it remains an avenue to go public. But it has been harder and harder for companies to get over the finish line, so to speak, due to increased execution risks, stricter SEC regulations and an overall decrease investor risk appetite for SPACs.

0:08:24.2 Joe Notaro: Lastly, a private company could go public by completing a reverse merger into a publicly traded shell company, so not with a SPAC vehicle. In this case, the publicly traded shell company is already public and then the private company shareholders receive a majority of the shares in the public entity. The advantages here is that it may be faster and less expensive to become public, but typically, the process may not raise as much capital as an IPO. Also, much like a SPAC, there could be business combination disclosure implications as well as the need to be compliant with internal controls much quicker. But in summary, any of these options is going to be time consuming and costly. There are also a lot of complexities involved, so you can never have too many experts to help you navigate the process. And like we tell our clients, no, it is not too early to start thinking about what you need to do. We’re going to move on into an IPO preparation timeline.

0:09:22.4 Joe Notaro: So two years to 18 months out, we’re going to emphasize best practices for going public. And really it’s geared to what stage and how far away you are from your IPO date. To be clear… And there are companies who decide to go public and get their six months later. Absolutely. Are they going to be able to do all the best practices listed here? Absolutely not. There just isn’t going to be enough time. Plus some of this stuff may need to be done after you go public. The last thing you want to do is cut your celebration short to implement a new ERP or address a handful of material weaknesses that your external auditor identified during the process. That is why we recommend you start the process as early as possible.

0:10:10.7 Joe Notaro: Setting aside 18 to 24 months is our recommendation and we’re going to explain why. So the first step on the slide should be self explanatory, but the company needs to ask itself why. Why do they want to be a public company? Is going public for you or is there an alternative to achieving your goals? I personally have spent a good chunk of my career in the life sciences space and drug discovery is expensive. Maybe venture capital funding got you into the lab and through preclinical trials or maybe even to phase two or phase three. But to get to the next phase of regulatory approval and have your first commercial launch, a company may need access to public markets to raise additional capital. Or how about an early stage technology company that needs to take its idea to the next level? Or the company that has developed the next generation lithium battery, but needs a capital infusion in order to build the plant to make manufacture the product or to fund additional research to make it last longer or cheaper or maybe to expand into new markets. Whatever the reason is, you need to make the decision internally.

0:11:19.8 Joe Notaro: This is the decision you’ll need to get support from the board and be unified on your timeline. Once you make the decision, you can build your narrative or your story on why your company is valuable. This includes highlighting your growth potential, your competitive advantages and other strengths, and why the only roadblock to achieving your vision is getting more capital. This is also a great opportunity to perform what is called an IPO Readiness Gap Assessment. An IPO Readiness Gap Assessment is when an outside firm that has helped companies go public before will come in and conduct interviews at the C-suite level. It really drills down into the company’s processes, systems and people.

0:12:04.1 Joe Notaro: While one of the focuses will be accounting and financial reporting, it covers much more than that. Tailored questions covering your human capital and human resources department, your legal infrastructure, what systems you have in place, what your org chart looks like. Even understanding if your current team has done it before will be covered. The end product will be an in depth report that will go through findings, recommendations and action items designed to help educate the C-suite and the board of the gaps in your company. The volume of action items is going to vary depending on the organization. If you’re a startup trying to go public, your list is probably going to be a lot longer than if you were a company that was public, went private and is going public again, or if you’re a spin out of an existing public company. But if you do this exercise in that 18 month to 24 month out stage of your journey, you’re going to be in good shape because although there’s still a lot of work to be done, you’re going to have time to get through the majority of them.

0:13:07.0 Joe Notaro: At 18 months out, this is really a great opportunity to start the roadmap and use the results of the IPO Readiness Gap Assessment. This is also a good chance to build your team of experts both internally and externally. You’ll notice this slide has quite the list of things to consider, so let’s cover some of them. One of the biggest challenges that companies face is as a private company, you may not have had an external audit requirement. And for those who did, oftentimes, the audit was conducted under AICPA standards and not PCAOB standards. If you think about the registration statement, the SEC has a requirement to include PCAOB audited financial statements.

0:13:50.2 Joe Notaro: So selecting the right external auditor here is going to be critical. Certain firms don’t do PCAOB audits and industry experience and resource constraints is going to be critical in making your selection. Under a PCAOB audit, your auditor is going to be much more limited in the assistance they can provide given the PCAOB Independent standards are going to be much more stringent. There are also going to be enhanced disclosure requirements and greater testing samples that would be need to be performed to support their audit opinion. Selecting your external auditor is a major step, but preparing for the PCAOB audit is just as important. Engaging with experts who know the process, know the industry and have done this before is going to be critical.

0:14:36.4 Joe Notaro: Oftentimes, this can be done by the same team who performed the IPO readiness gap assessment. Their role will vary based on the stage of maturity of your company. Some companies already have a robust accounting team and just need help with reviewing the historical complex transactions and preparing memos and other documentation that the auditors will be able to review. Other companies have been on the cash basis of accounting or maybe have prepared a tax ready trial balance historically and will need some TLC to review historical transactions and prepare for the audit. They may lack account reconciliations or even the resources needed to pull support for the audit.

0:15:18.0 Joe Notaro: Some companies were historically audited, as I mentioned, so there may be a set of financial statements and footnotes out there, but they just need someone to review them for gaps or to lift them up to PCAOB standards. Others may just need a project manager in place to make sure everything stays on track. Point is, here there’s a lot to do and the last thing you want to do is engage an auditor, have them go through planning and schedule a fieldwork start date only to realize you as a company are not ready for them to start.

0:15:49.7 Joe Notaro: This is also a great opportunity to start building your team of external experts, so SEC lawyers. This is going to be critical as well. First, assessing if your current firm has the expertise, the experience and the bandwidth to meet your goals and your timeline is usually a good first step. There are also a lot of great firms out there that specialize in this process and they should be brought in early. SEC counsel, among other things, will help set the project plan. Based on the deal structure and when the company wants to ultimately go public, they will help determine when the company will need the plan to file initially.

0:16:26.4 Joe Notaro: The SEC Council will also confirm your anticipated filing status, which could help determine things like the number of years of PCAOB audited financial statements needed in the registration statement and when management will need to opine on their internal controls. We’ll talk a little bit more about that later. They will also work very closely with the audit readiness experts and the external auditors to ensure everything is staying on track. Speaking of internal controls, another key expert to consider relates to ensuring you are ready from a stocks perspective.

0:17:00.6 Joe Notaro: As a public company, management will need to assess and sign off in your public documents that the company’s internal controls over financial reporting are effective. Under a traditional IPO, the company will be exempt from this in its initial form 10k, but not in the second. All filers are required to comply with this in year two. However, depending on the filing status, management may also need its external auditors to opine on the company’s internal controls over financial reporting as early as the second year. Some companies will be exempt for this for a number of years depending on the filing status, but even before that, regardless of the requirement, getting a head start is going to be critical as there is a lot of documentation requirements and focusing on this could actually make for a smoother external audit process.

0:17:54.0 Joe Notaro: Another expert you’re going to want to identify engaged during this timeframe is your valuation expert. This applies to companies who issue stock based compensation or preferred stock, have lease contracts, or enter into complex transactions such as business combinations or transactions where they could have embedded derivatives. This is especially important for stock options as valuation assumptions need to become more robust and fine tuned as you approach the IPO date.

0:18:24.0 Joe Notaro: Income tax expertise is always important on many levels. From ensuring the transaction itself is accounted for correctly, returns are filed timely, to the income tax provision disclosures, you’re going to want to assess your current levels of expertise and bring in the appropriate experts where needed. A lot of these resources can be handled by third parties, but this is also a good time to start building out your internal team as well. The IPO readiness gap assessment will also cover the people aspect, so you can use that as a good guide. Chances are, you’re going to need more headcount in accounting and finance just by the nature of the tighter deadlines of being a public company. So during that process, a CFO should be identified, one that has the expertise to build the team with the appropriate close SEC reporting, technical accounting, internal audit and FP&A experience.

0:19:20.0 Joe Notaro: Investor relations is another consideration that should start to be identified. We spoke about external legal, but identifying an in-house general counsel for those companies who do not have one in place will also be important. And last but not least, human resources will begin to wear more hats as a public company dealing with stock options and employee benefit plans. There’s just going to be a lot more to build and it’s easier to spread out than do it all at once.

0:19:49.9 Joe Notaro: Another area of focus of the IPO readiness assessment is going to be the systems. There could be certain industry specific enhancements to consider as well, but this is going to be a good time to start thinking about the following. First and foremost, a financial reporting ERP. As an early stage private company, maybe QuickBooks served its purpose. Assessing if it’s time to go live on a new system is always recommended as early on in the process. Same with HR and payroll. You’re going to have more employees, you’re probably going to have stock options. There could be tax implications that you want to track. So making sure you have the right systems in place to meet your needs not only of today, but of tomorrow. And it should come as no surprise but identifying the SEC reporting software so it’s not only going to handle the 10Ks and 10Qs that you’re going to all of a sudden have to be required to file in a timely manner, but also Form 3s and Form 4 disclosures once you go public. A lot of times companies will engage a printer prior to going IPO, which will handle the administrative aspects of the filing. But as a public company, utilizing a software solution is highly recommended. This will help streamline the reporting process and could make the IPO process easier as well.

0:21:10.6 Joe Notaro: The next system we wanted to talk about is the stock based compensation system, which is going to be covered a little bit later by John, but this one is often overlooked because there are system solutions that have become industry standard for private companies. They will work along with the manual cap table to track the outstanding shares and options. However, as a public company, they’re just not going to have the capabilities needed to support you after an IPO based on the sheer increased volume. This is why we recommend focusing on this area as well while there’s still time. So we purposely spent a good amount of time on this slide for a reason. There’s a lot of things that you could be doing to consider even if you are a year or two away from your IPO. This phase of the timeline will include a lot of planning, meeting and selecting vendors and building out your internal team. It will also be a good opportunity to check a lot of the items of the IPO assessment off your list.

0:22:09.5 Joe Notaro: So at the 18 month mark, this is where you’re really going to have to refresh your timeline and work with the board to determine, is this something you really want to do? At this point, we spent a lot of time planning, meeting with vendors, building the team. Now it’s time to get to work, so to speak. As we mentioned before, one of the biggest challenges is with all the other stuff to do, getting through your PCAOB audits so that your auditors will be ready to issue their opinions that will ultimately go into the registration statement. We also discussed, depending on your filing status, you may need two PCAOB audits or you could need three. And I’ll reiterate, while it’s definitely been done before, waiting until the last six months to complete those two or three audits is not recommended. This is why getting your first PCAOB audit out of the way in the year prior to actually going public is what we recommend. This is where your audit readiness, your SOX and your technical accounting team is really going to play a huge part im helping you get through the process.

0:23:12.7 Joe Notaro: How early you start the prep process is really going to depend on what stage your company is in. If you’ve been getting AICPA audits for years or if you were public in the past, it will be a quicker process than if this is your first time being audited altogether. Typically, a first time audit or a change in auditor is just going to take longer. The key here is going to be establishing an auditable opening balance sheet complete with reconciliations, complex historical transactions documented thoroughly. And the same goes for any complex transactions that occurred during the years under audit. You’re also going to want to have documentation around significant accounts like your contracts with customers, leases, and any debt and equity transactions in place to fund your operations.

0:24:02.0 Joe Notaro: Process narratives are also going to be helpful. No matter what audit firm you choose, they’re going to have a need and requirement to gain an understanding of the significant processes within the organization. Having these processes documented and available to your auditors could actually reduce the sample sizes the auditors will need to test. So that’s a good thing. I want to highlight an example. Let’s say you’re a 12/31 year end. Let’s say it’s the summer of 2025 and the board wants to be ready to go public in January or February of 2027. Let’s also assume we’re an emerging growth company filing status, which would mean two years of PCAOB audited financial statements are required to be presented in the registration statement. Ultimately, to go public in that timeframe, you’re going to need PCAOB audits for 2024 and 2025 as well as interim financial statements for the six month interim 2026. That’ll be used in the initial filing and then you’ll need nine month interim 2026 to also go public.

0:25:08.0 Joe Notaro: So our recommendation would be you engage an auditor to complete the 2024 audit under PCAOB standards which can be completed by the end of 2025. Trust me when I tell you, this initial audit is going to be a substantial lift. Having the first one completed so you could focus time and energy on all the other demands that are going to come your way is going to make for a smoother process. Then, if we shift over to the right side of the slide, you could focus on building out the registration statement working team. This is typically going to consist of your CEO, your CFO, other key members of the C-suite, your financial reporting experts, legal and your auditors. This is a critical stage because you can map out the timeline, the roles and responsibilities, set key milestones and hold each other accountable.

0:26:01.8 Joe Notaro: So let’s go back to the example. The Board is still committed to be ready to go public in January or February of 2027. You’ve completed your first PCAOB audit and hopefully between knowing the process and how things worked and your expert team in place, the second time around is going to be a lot smoother. This is because you’ve already prepared the documentation for all the historical transactions. You have a financial statement footnote framework that both management and the auditors are comfortable with. So the hope is, it will be more of an evolutionary update than recreating the wheel. Hopefully by the summer of 2026 you will be in a position to complete your second PCAOB audit and will be in really good shape to shift into the registration statement process.

0:26:50.4 Joe Notaro: For those of you unfamiliar with the registration statement, for an IPO, the most typical form is the S1 and this is where the working group is going to go through all the required sections of the document and assign roles and responsibilities. Legal is going to own a good chunk of the documents such as the risk factors and the MDNA. The accounting team and your technical accounting experts will typically own the financial statements and any tables in the MDNA or other sections of the document that will have financial information. Management and legal will work through areas like the business overview and business drivers.

0:27:29.3 Joe Notaro: At this stage, the working group will determine whether to file confidentially or publicly. The benefit here is, as you go down the confidential path, you could get your first round of comments from the SEC. So after you file, 30 days after, the SEC will send a letter with questions or edits on the filed documents that the working group will work together to provide responses to. Again, it will be a divide up and conquer approach based on the section of the document. The comment is left with the goal to respond to the SEC as quickly as possible. During the process, you can generally expect two to three rounds of comments, sometimes more, but this is where having the legal and technical accounting expertise and the experience is really going to come in handy as the comments tend to be consistent and industry specific.

0:28:23.2 Joe Notaro: I mentioned before about the need for interim financial statements and I also mentioned in the example needing both 6 months and 9 months based on the proposed timeline of the company. This is because you cannot file a registration statement with financial statements older than 134 days. So as you respond to the SEC and refile your S1 multiple times during the process, your financial statements are going to go stale at least once. The good news is that interim financial statements do not need to be audited, but they are reviewed by your external auditors. But going from an annual only close to a quarterly close can sometimes be challenging, so it’s important to have the right experts and resources in place.

0:29:08.6 Joe Notaro: The rules can also vary if you’re a foreign private issuer, so it’s important to work with your legal experts to ensure you are in compliance with all the SEC standards. The reason for this is, the SEC rules around financial statement staleness could vary. As a foreign private issuer, the staleness date is usually longer and interim financial statement requirements are different as well. All the time and effort that the working group puts in into the S1 leads up to the roadshow. Bankers are going to drive this stage, working with the company’s management team to connect with investors and help the companies finalize the transaction.

0:29:51.5 Joe Notaro: Banks will set up meetings with potential investors to listen to your pitch and decide if they want to fund your company. It’s important to have your company’s story and pitch buttoned up and ready to go so your team can create a compelling presentation. Investors will make their decisions based on many factors, including the commercial potential of the product, the management team, and the equity narrative presented. The financials may play a limited role in the roadshow depending on the company’s circumstances. However, their accuracy, quality and timeliness are crucial to a successful close. As they approach pricing, companies will often need to process a stock split to update their capital structure for the desired IPO price in accordance with the expected valuation. Those stock splits must be processed through the entire S1 document in real time. This is a very time consuming undertaking and companies only have a small window to process these splits, so must lean on an experienced consultant along with legal counsel for assistance. But if it all comes together, the S1 is declared effective and you’ve completed the journey, you are now a public company.

0:31:05.9 Joe Notaro: While it’s definitely quite the accomplishment to get here, it’s important to remember that this is just the beginning. After the dust settles, you are a public company and are subject to the public reporting deadlines. Typically, the first filing you get a little bit of a grace period, but not for the second. These deadlines will vary based on your filing status with the general rule being, the larger the company, the quicker the turnaround time here. While you continue, you could continue to rely on the external experts you brought in for the IPO. After going public, a lot of times you will start to build out your team internally and bring in people who could close the books, prepare the financial statements and ultimately get through the audit and review in time to meet the public company reporting deadlines. These deadlines could vary if you qualify as a foreign private issuer, which are typically less stringent than domestic filers.

0:32:02.3 Joe Notaro: There is also the matter of internal controls in internal audit. At this point, hopefully you’ve done some work as part of the planning phase and the pre-IPO phase, but now you are on the clock, so to speak. As we discussed earlier, management will need to certify that its internal controls over financial reporting are operating effectively as soon as 404A is required and will require an external audit opinion over the operating effectiveness of internal controls once 404B is required. There are also non-periodic reporting disclosure requirements such as Form 8-Ks, Forms 3s and 4s, an annual proxy statement and earnings releases to think about.

0:32:46.2 Joe Notaro: Another consideration is a perk that most public companies offer to its employees. You may want to issue employee stock options as a public company. So like I said before, the journey has just begun. As I close out on this section, I will leave you with two important takeaways. Start the process as early as possible and you can never have too much help. With that, I’m going to turn it over to John who’s going to go through a deeper dive on equity compensation as it relates to the IPO process.

0:33:22.7 John Bagdonas: All right, Joe, thanks. Thanks very much and I know you’ve already covered a very significant amount of the importance of reporting and particularly, I know you did touch on quite a bit from an equity comp standpoint, but let me just maybe take a little step back and ask just sort of a basic question as I do a little deeper dive into the topic is, why does a company or why did anyone make the choice to undertake this hugely complicated endeavor, meaning going through an IPO or some other capital market transaction? And obviously, at least from my perspective, it’s to reward the shareholders and the employees. It’s driving towards some kind of liquidity event. And again, it’s like once in a lifetime event. But as you have stressed numerous times during your segment, it’s critically important to get it correct, particularly from a reporting standpoint, that you can look at equity compensation to a certain extent as a supporting event up until and through an IPO. But it really is a bigger picture in terms of what your company is going to do, how you’re going to track talent going forward. And so it’s really critically important to get it right and get it on the roadmap, as you’ve stressed quite a bit, as soon as possible.

0:34:35.6 John Bagdonas: The way I like to think about it is, there’s so many variables and things that you are going to have to cover as a company going through this process, as you’ve so thoroughly documented for all of us or let us see, that to the extent that you can get things on the roadmap much further or much earlier in the process, it’s only going to help you so much more, both in the shorter term and going through the IPO process and also longer term. Because if you think about most companies, particularly earlier stage companies or maybe slightly later stage companies, from an equity comp standpoint, you eventually have to graduate from spreadsheets. So it’s not uncommon for companies to start, particularly startup companies and early stage companies, to manage it completely internally, whether it’s just on Excel or some internal application or some of the other third party SaaS applications that are out there to manage cap table and the like. But eventually, as you get later or closer towards that IPO event, the pain starts to increase in terms of what you need to do, whether it’s from a reporting standpoint or actually managing that equity plan.

0:35:48.0 John Bagdonas: And so the choices, in my experience, you see what the big driver, as I said, is typically what are the pain points? And so for some companies, if they have particularly more complex sort of an equity type plan, let’s say, with performance, awards and targets and things like that, there are not that many… I mean, obviously from a spreadsheet standpoint, that’s complicated to manage. And for some of the cap table applications that are out there as well, it’s much more complicated to try to manage it on those platforms as your plan gets more complex, or let’s say, if your shareholders or employees are or become multinational, there are some complexities in terms of offering additional complexities, I should say, of offering equity compensation to people in different parts of the world.

0:36:34.9 John Bagdonas: So it really, really is important to try to reduce those variables or going back to my old engineering days, limited degrees of freedom. The less things that can go wrong, particularly from a risk management standpoint, the better. So it’s very important to get into that cadence of reporting, to have an application or a partner or supplier that can help you with that and also track and manage all of the performance, as I said, tracking of awards, et cetera.

0:37:06.6 John Bagdonas: Another critical thing, as you touched on already, is being able to connect with other applications and integrate into third party systems, particularly from a reporting standpoint. As your reporting becomes much more complicated, it’s much better to have it in one place or to have an application or a partner that is an integrated solution. And so, I can’t stress enough to be able to, or to get focused on and get it on your roadmap as soon as possible. And lastly, just to talk about the importance of using an experienced partner that’s been there, that’s done it before, and that you really want to choose a platform or partner that is truly compliant with all of the requirements and things that you’ve already talked about. They can provide integrated reporting, particularly taking in third party sources and things along those lines.

0:37:57.8 John Bagdonas: The other thing that people sometimes overlook is the communication side of it, particularly from a participant standpoint or even your shareholders, to be able to have a platform where they can easily get that information and appreciate that benefit and what the end result is going to be going through the transaction and what’s another very important piece going forward beyond the IPO or the capitalization event, is to make sure that it’s scalable.

0:38:25.7 John Bagdonas: If you’re a high growth company or on the potential to grow significantly through the IPO and beyond, you want to make sure that you have a solution that’s scalable because as I said, you’re going to have to initially graduate onto some platform or with a partner. But ultimately, you don’t want to have to do that multiple times. So you really want to sit down and make sure you have a provider that, even more importantly, can minimize the number of changes you need to make going through that event. So from a participant or the client standpoint, to the extent that that experience can be the same all the way through that transaction, the transition is very important. So it’s important to look at that and to make sure you make a longer term judgment and selection.

0:39:15.0 John Bagdonas: So hopefully, we’ve provided enough information for people to consider the totality of the event, and I know you covered a tremendous amount of information and I know we could spend the whole day talking about this fascinating subject, but unfortunately we’re well out of time at this point. So thanks Joe for sharing your knowledge and insights. And thank you, all of you for joining us for this special joint webinar from JP Morgan Workplace Solutions in Forvis Mazars.

0:39:43.2 Chris Dohrmann: Thank you, Joe and John. If you’d like to learn more about equity plans and IPOs, you can download our free ebook Going Public: Your Equity Compensation guide to IPO from our website globalshares.com where you’ll also find information on the latest equity compensation news, insights and product updates. And as always, if you’ve made it this far, thanks for listening.

0:40:07.4 Information provided in this podcast is intended for informational and educational purposes only. It may contain views which differ from the views of JP Morgan Chase and Company. For specific guidance on how this information should be applied to your situation, you should consult a qualified professional. For full details, see the show notes on your podcast player right now. The Prosperity at Work Podcast is produced by dustpod.io for JP Morgan Workplace Solutions

Lauren Jenkins: Welcome to Prosperity at Work from JP Morgan Workplace Solutions. I’m Lauren Jenkin and I’m joined today by Jorge Martin, Ryan Shreero, Jackson Vaught and finally, Nancy Romanyshyn, Senior Director, Total Reward Strategy and Solutions at Syndio. In today’s session we’ll be diving into the findings of our 2024 Trends in Equity Compensation Report to lift the lid on the current state of equity programs around the world. Our 2024 Trends in Equity Compensation Report is available to download now, click on the link below or visit our website @globalshares.com we surveyed more than 200 equity compensation professionals from companies and industries around the globe to gain insights and get a better understanding of the challenges and opportunities they’re currently facing. Our survey’s findings make it clear that equity plans are broadly seen as a tool for ensuring future business success and strengthening the relationship between the worker and the company.

Lauren Jenkins: Equity compensation continues to be the foundation of talent management strategies. There’s no such thing as a one size fits all stock plan. Each must be designed with business goals, employee needs and even demographics in mind. Now let’s hear from Jorge Martin, Head of North America Equity Plan services here at JP Morgan Workplace Solutions. Jorge, can you speak on the incentives for companies to offer share plans and what this means for their business?

Jorge Martin: Hi Lauren, thanks for having me. And I think really it allows an alignment between the employees and the overall corporate goals that have been established. And so when the company is successful, the employees see themselves as successful and they’re engaging and they are also contributing to the success of the company. And just as importantly, they’re getting rewarded for the success of the company as well. So it creates this really nice holistic compensation plan that really neatly aligns shareholder goals with employee goals and company goals as well.

Lauren Jenkins: What are the benefits of offering equity to all employees and not just executives?

Jorge Martin: It really allows you to have the entire employee population contribute again to the corporate goals and it really creates that sense of ownership not just for the executives, but even for entry level employees as well. And something as simple as allowing them to participate in an employee stock purchase plan allows them to see the benefit of them working, getting the shares in their ESPV, and then also they get to see the benefit that they get when they have those shares deposited and then ultimately when they sell those shares for a profit too.

Lauren Jenkins: What would you say are the pain points of operating share plans and how do you solve them?

Jorge Martin: The biggest pain points I think are communication. And so how do you communicate to an employee the benefit that you have given them? Salary is fairly easy for them to understand. But then when you start granting options or restricted stock and then you have to explain to them what a best schedule means, a taxation around those equity instruments, it becomes much more complicated to explain that to these employees. And so I think education is a really key area where companies need to focus when they’re offering equity to all employees. I would argue that even for executives, and I think some of my peers here who work with executives on a day to day basis can attest to the fact that some of them also have a lot of questions around equity despite the level of their company. So really that level of education is important and it’s not a one and done. It is consistently offering them different avenues to gain that education at Grant, at Vest, at Sail. Those are all really, really important. And then I would also add that the most important thing here is to try to keep your plan as simple as possible.

Jorge Martin: There were over the course of the last decade or so a lot of very unique, exotic plans put out. The more exotic that plan, the harder it is for you to tie the benefit that the employee is getting with the success of the corporation and the more you need to consistently educate about the benefit. So really keeping it as simple as possible and not allowing a consultant necessarily to come in and then offer you a very unique plan that’s gonna take you a long time to tie those benefits to those employees as well.

Lauren Jenkins: We know that equity compensation is a very powerful tool to combat attrition. Losing senior people to competitors can be a major cause of concern. Disruption to plans, loss of knowledge, skills, leadership and continuity all impacted. Not to mention the costs of then trying to recruit suitable replacements. Next, let’s hear from Ryan Shreero, Restricted Stock Group at JP Morgan Private Bank. Ryan, what are some of the current trends and key challenges you’re seeing in structuring executive compensation amid today’s economic and regulatory landscape?

Ryan Shreero: Hi Lauren, thanks so much. Yeah, we’re really seeing more of everything. So more equity based compensation at all levels of company employees. So from rank and file all the way up through the C Suite, a lot of these work, you know, originally designed for C suite individuals, but it’s really, it’s just more and more becoming an equity comp based program across all different levels of employees at companies. There’s also a lot more choices available to them where there’s things out there called cafeteria plans, where employees have the ability and mostly officers, but a lot of employees and officers will have the ability to kind of choose what kind of equity comp they want, whether it’s performance units or restricted stock units or just a traditional stock options and sort of lastly, we’re seeing much more complexity from the regulators when it comes to equity compensation. Seeing regulators come in a little over a year ago and change the cooling off periods for trading plans, extending those from just a few days to 30 days to 90 days. We’re seeing trade parameters being scrutinized when it comes to single trade plans as opposed to multifaceted plans that extend over different time periods.

Ryan Shreero: And additionally on the issuer side, we’re seeing a lot of complexity coming in with disclosures of who has a plan and when are they supposed to tell the public that they have a plan in place. So more of all equity coming in and also more rules and regulations and nuances that we need to pay attention to.

Lauren Jenkins: In the report you mentioned, it’s time to move beyond the golden handcuffs. Can you talk a bit about the add ons, enhancements and additional benefits that companies can use to customize their rewards package for executives so that they can stand out from competitors?

Ryan Shreero: Sure, yeah. I think it’s important to kind of refresh like what the goal of equity compensation is in the first place. And let’s remember our goal is to attract key talent, to retain that key talent and to inspire that key talent. Ultimately helping a company maximize their ROI on their equity comp platform. How do you go about maximizing your ROI? How do you go about maximizing every dollar spent that a company uses to incentivize employees? And I think a great way to do that is to help all the participants, every employee at a company that’s receiving equity comp to have a positive experience. And they can have a positive experience through education, through advice. And ultimately the education and advice helps them maximize every dollar that the company spends that actually will land in their pocket as well. So for example, if you have an incentive stock option that would have preferential tax treatment, but without any advice or education, you just go into the market and sell it all at once. It gets treated as a non qualified stock option, nullifying the preferential tax treatment for long term capital gains. That’s something through advice and education we can try to avoid and help participants and employees to maximize that and plan for that appropriately.

Lauren Jenkins: And finally, Ryan, how are recent SEC amendments and other regulatory changes impacting the design and use of 10b5-1 plans?

Ryan Shreero: Yeah, good question. Really more planning is needed going into these plans. There is so much more that we need to be aware of going into a plan and so much more we need to plan for when it comes to a 91 day cooling off period or trades going in the 91st day. So these are three months that they cool off. Now there’s a lot that goes into that. So you gotta go beyond the date. The three tenants, the original three tenants of any sort of a trading plan that you might be putting in place for an employee would be date, amount and price. You gotta go way beyond that. And you gotta think about Rule 10b5-1 and putting plans in place that really consider grants, the vesting schedules that they have, the tax lots that they’re tackling, the different holding periods again for the ISOs versus the non qualified stock options. Whether you’re putting in a trade during an open window period or you’re building a 10b5-1 plan, and if you are building a 10B5-1 plan, is that a single trade plan which are only allowed one per year or is it across different time periods within the plan? And then I would say ultimately timing of the next plan that you hope to put in place.

Ryan Shreero: Does your plan expire during another open window so you can put another plan in place? These are all things that if you work through a company that will help you with advice and education, you can sort of navigate through. But I think ultimately you wouldn’t want to hike Everest without a mountaineer guide, nor would you. You want to do any of these sort of things without sort of a financial professional helping you along the way and a tax professional helping you along the way. ‘Cause if it’s done right, it can be very beneficial both for the individual and the company.

Lauren Jenkins: There’s clearly a lot of value in offering Equity Compensation to your workforce. Of course, that doesn’t come without its challenges. Our survey found some common pitfalls when it comes to the introduction and running of an Equity Compensation Program. Are under promoting the plan to participants, losing sight of the target audience and not knowing how to measure success. Next we’ll turn it over to you. Jackson Vaught, head of Reinvestment Strategy and participant engagement Equity Plan Services here at JP Morgan Workplace Solutions. Jackson, what are the reasons employees, including executives, might not make full use of their plans?

Jackson Vaught: People don’t make full use of their plans for a lot of different reasons. But I think you can kind of, generally speaking, boil it into a lack of one of three things. I think the first and probably most important piece that might be lacking is just a general lack of communication. Equity plans, as my colleagues Jorge and Ryan have already touched on, can be very complex and are only becoming more complex as the industry evolves in certain cases. And so ensuring that you’re communicating exactly what’s going on with that plan regularly and effectively is frankly a very tough nut to crack that very few companies do very, very well. So that lack of communication is one thing that can oftentimes be missing. The second thing that’s oftentimes lacking is a lack of perceived value by the employee. And I think that, I know in your question you called out executives specifically. And I think oftentimes people make the mistake of assuming that just because someone is an executive and might have a higher wealth profile, they have a higher degree of financial acumen. And I can assure you that that is not always the case. I see some of my colleagues smiling ’cause they have certainly witnessed this as well.

Jackson Vaught: But in all seriousness, you can never assume that just because someone has on paper a lot of money that they necessarily what to do that they know what to do with that amount of money. People don’t value what they don’t understand. And so if you’re not explaining it to them effectively, they’re not going to take advantage of it. And the third bucket, the third thing that’s oftentimes lacking is just a general sense of long term planning. People, generally speaking, think very, very short term with their money. They’re trying to achieve that next kind of big thing in their to do list, whether it be, you know, a boat or a trip or sending a kid to college. But that’s why we believe at JP Morgan it’s incredibly important. And where we feel like we can plug that hole with our financial advisors is closing that gap and lack of understanding. I’ll use Ryan’s reference. You certainly do not want to climb Everest without a guide. And so we feel like our financial advisors here can help be that guide. Not just solving the long term planning piece, but also solving that lack of perceived value as well as the lack of communication that folks may experience.

Lauren Jenkins: Communicating with employees was cited as an issue by almost half of respondents, 47% ranking it as the second biggest pain point for companies when it comes to managing a plan. What are the best practices for accommodating different learning Styles to effectively educate a diverse and global workforce?

Jackson Vaught: That’s a great question. And again, as I hit on communications becomes even more challenging as we evolve in society, I think that I’ll confess my Gmail right now has well over 50,000 unread messages in there. I doubt I’m alone in that. And what that really shows you is that it is we live in an information overload age, right? And so we have to be very thoughtful. And what we try to do here at Workplace Solutions is be very thoughtful with our clients. And how do you communicate effectively during those key moments that matter where people are actually going to listen to you? And doing that with an ever globalizing, multi generational workforce just makes it that much harder. But generally speaking, I think three best practices that anyone can adapt and implement pretty immediately are first, one, look at the types of channels that you’re communicating to your employees. Email is not always the answer. I think email is oftentimes an easy answer. But there are many other levers you can pull to communicate with your population, Whether it be webinars and seminars like what we’re doing today, whether it be leveraging more modern technologies like chatbots, or again, depending upon your workforce and your employees, maybe more traditional things like posters and printed materials.

Jackson Vaught: I’ve seen all of it work very, very effectively based on the profile of the company and the profile of the employee. The next kind of best practice, I would say, is you definitely want to make sure that your communication plan, while scalable for the size of your company, does have those more localized elements. So this is where knowing your audience, knowing your employee base is really important. A really, really easy thing that you can do to localize your communication strategy is to take advantage of time zones. So if you have a global workforce, taking your emails and splitting them into maybe three different buckets rather than one, send one during APAC business hours for your Asia Pacific employees, one during EMEA business hours for your European employees, and one during North American business hours for those employees. I guarantee you you’ll see an uptick in engagement with whatever you’re doing. And then finally, you want to make sure that you have a technology platform that allows you to make again while creating a plan that’s scalable, making your communications feel personalized. And so that’s taking advantage of things like putting somebody’s first name in the subject line of an email or making sure that the links that are embedded in an email are personalized to that person and things that they can access.

Jackson Vaught: So those are things that everyone should be able to take advantage of, or I hope everyone can take advantage of in 2025. And if those aren’t things that you are thinking about, I highly recommend you start thinking about them. And I guarantee you you’ll see an uptick in engagement with your global workforce.

Lauren Jenkins: You touched on this a bit with your last answer, but what would you say are the biggest challenges companies face in managing share plans for a multi generational workforce?

Jackson Vaught: I would say different generations communicate in different ways, just like people in different geographies communicate in different ways. I’ll self recognize as a millennial. I don’t want you to call me, I want you to email me. Phone calls are scary. And again, I’m probably not the only millennial that feels that way. But for older generations, they want a phone call, they want to interact with a human in that way. And again, having a strategy that adapts to those kind of, generally speaking, generational trends is really important. I remember very early in my career in this industry, I was working with a company that was having trouble reaching a former employee that had options in the money. And it was a lot of money. And they were not responding to our emails. And so a very long story made short. We were able to contact this individual via phone and let them know that they had a very sizable option getting ready to expire. And this person was able to take that money and put the down payment on a retirement home. And I think that’s amazing like that’s why I get excited to work in this industry, because I really do feel like we have the ability to make a difference in people’s lives.

Jackson Vaught: And so I share that story because again, this was an older person who hadn’t updated their email address, wasn’t really staying on top of things maybe, as we would assume they would. And so again, just catering your communication styles to different generations is important. Another thing that I think is important as well, not just in the ways you communicate with different generations. Leveraging different tools, like phone, for example, for, for maybe older people, but also emphasizing different aspects of why you have equity compensation in the first place can really be effective for different generations. So for example, for someone who’s younger, just starting out in their career, maybe getting equity for the first time, really doubling down on the fact that you use equity as a tool to keep them, a retention strategy is really, really going to resonate with someone, let’s say under the age of 35 versus if you’re communicating about your equity plan to someone who’s a little closer to retirement and is going to leverage this directly as part of their retirement plan. That is where you should be emphasizing your key messaging when you’re talking to them about taking advantage of their plan.

Jackson Vaught: And then the last thing that I would say is be wary of the changes in the regulatory environment. Ryan already hit on this. But the regulatory environment in this space has changed a lot in the last 10, 20 years, even a lot in the last few years. And so people that are older, that may have had equity longer, more simple plans for longer, may not be aware of the changes that have recently happened in our industry. And so making sure that that information is being communicated directly to participants, particularly people that may have had equity longer and aren’t used to the new way that things are, is incredibly important.

Lauren Jenkins: Next we’ll hear from Nancy Romanyshyn, senior director, Total Rewards Strategy and Solutions at Syndio. Nancy, as we look to 2025 and what might lie ahead, what trends do you see emerging around pay transparency?

Nancy Romanyshyn: Well, I think it’s a lot of the things we’ve been hearing about throughout, which to me, if I had to sum up, there’s a big difference between what you design and then what you actually do in practice. And that difference is really coming to the forefront with pay transparency. So I think when I think about 2023, that was when we were first realizing, oh, my gosh, this is real. And then Last year, over 2024, I spoke with hundreds of Total Rewards leaders. And depending on their footprints, you could see everybody sort of grappling with how are we going to operationalize this? There’s so many differences going on across different jurisdictions. So depending on their footprint, they’re moving slowly and preparing. But a lot of them were trying to activate leadership, I would say, this past year, around their plans and really what are becoming global transparency initiatives, I would say. So this is the year, I would say 2025 is the year of taking action. Folks are starting to activate these plans.

Lauren Jenkins: They’re conducting the analytics they need to prepare and quite honestly refine the rewards program. So some of the things we were just hearing around design implications, the way the regulatory environment has changed is really having folks sort of reconsider maybe what it is that they’re doing and then also getting this feedback where we’re seeing some designs, you know, if they’re, they’re not being utilized, is it because of lack of communication? What can we do to ramp up and improve that? What are ways that we can really meet our employees where they are so scaling, training and communications.

Nancy Romanyshyn: Especially so the people leading the employees can have the conversations as well as the employees themselves can really understand and take advantage of their rewards programs. Those I think we’re really going to be seeing ramp up over the course of this year. And then I would say in terms of regulatory environment too, but it has much broader implications is the EU Pay Transparency Directive. So I would say out of all of the legislation we’ve seen so far, we have never seen something like this. It is far reaching. It impacts. If you, even if you are a US company with employees in the EU, you’re going to have to do pay equity analysis, you’re going to have to do pay gap analysis and reporting, you’re going to have to have pay transparency and career transparency. There’s a right to information component. And when we talk about pay, they’re interpreting pay to be very broad. It’s all forms of remuneration. So it includes equity, it includes allowances, benefits. So there’s a huge wave of requirements that are coming. And this too we’re seeing companies are really realizing that pay transparency is kind of, it’s the sum is greater than its parts is the way I like to think about it.

Nancy Romanyshyn: It’s truly a company wide initiative requiring multiple work streams across different areas of your organization. So being prepared to look critically at your programs and then being able to explain them in a variety of ways, that’s really what we’re seeing taking place, I would say, for this next year.

Lauren Jenkins: And for what has taken place with pay transparency to date. Have you observed it playing a role in employee retention?

Nancy Romanyshyn: Oh, absolutely. And I think it goes too to communication styles and I think just the information that everybody has access to right now. So it’s been, I think, really interesting with all the information that is available to employees. Now you’re seeing, I like to joke that employees are compensation analysts ’cause they’re doing their own research and they can look online and they can pretty much find information about any component of their pay. So to be transparent, coming out in front of those say, stories that might be… Being told either about your organization or about their role and what they should be paid, it’s really important for employers to come out ahead of that and to really explain fully, here’s the whole package of what you have. Here are all the benefits to this. Let me make this real for you in a variety of different ways. I mean, employees are really, I mean, all you have to do is actually go on Instagram and look up pay transparency or negotiating my salary or any of that. You’re gonna see a lot of people posting and giving great advice about what are the things you should be asking for and the questions you should be asking.

Nancy Romanyshyn: And they’re not wrong. It’s just that they’re not talking about your company. So I think it’s really important that you as the employer should say, this is why we’ve built what we’ve built. Here’s the program, this is what it offers you. Here are the success stories. I love the story that you just shared around this is what this employee was able to do with this. I think making it real for folks like that and thinking about communicating in ways that again, just sort of meet them where they are. Honestly, those are the things that have been effective in terms of retention. Because employees, at the end of the day, they really just want to know that they’re paid fairly, they don’t need to be paid the most. They want to understand, though, that you have a consistent process, that you can be transparent about understanding fully what it is that you’re giving them in terms of rewards. I joke too, that they’re rewards. They’re supposed to be rewarding. That’s an important thing to just kind of remember. Just put them at the center and think about what are the questions that they want to know. How can we show how much we value them? ‘Cause that’s what you’re communicating with your total rewards programs.

Lauren Jenkins: And to expand on that a bit further, as we see these disclosure laws taking effect, what role do you see companies playing in anticipating and addressing employees questions and handling their concerns around pay transparency?

Nancy Romanyshyn: I think the moment to start is now or yesterday, I should say. But yeah, I think companies are uncomfortable. Quite honestly, a lot of folks in leadership are not comfortable speaking as openly about pay, and they’re going to have to get used to that. And the important thing would be to really analyze what you have. And when I say analyze, I think go deep. So it is really about looking at different groups of employees across different jurisdictions to really have a good solid understanding of how their compensation is truly playing out for them. Understanding that and then looking critically to say, are these programs designed in a way that they’re doing what they’re intended? What are refinements that we potentially need to build in here? How can we execute this in a way that we’re probably going to have to do a transition from what we’re doing today to what we’re going to need to do tomorrow? And how do we do that smoothly? How do we bring employees along in that conversation? Those are the types of decisions that are happening now. Because I think what folks need to expect is that every component of pay is going to be transparent.

Nancy Romanyshyn: So if there are inconsistencies, if there are places where certain people have negotiated different deals and others are unaware of those deals, you’re going to have to reconcile that. You’re going to have to explain that. And to me, it’s more than just compliance. It’s about that internal transparency and sense of fairness that you have at your organization. So it’s not to say that everybody has to be paid the same. I think we’re actually going to be moving away from that, especially with so much knowledge available to employees about how they should be paid. So they have a great deal of agency now and they also, they advocate for others. They want to make sure that there is this overall fairness. So I think just being adult about explaining well, we are paying Joe more than Sue because of this specific skill set is okay. It’s okay to come out with things like that. You’re really going to have to make sure that all of those decisions you can look critically at and say authentically are made because of the business need, not because Joe’s a better negotiator than Sue or Joe was hired at a time that we just had more budget. Those are the types of distinctions I think everyone’s just going to have to get very clear on.

Lauren Jenkins: Thank you for your insights, Nancy. Thank you all so much and thank you for joining our roundtable discussion today. As always, if you’ve made it this far, thanks for listening and check out our website, globalshares.com for the latest equity comp news, insights and prospects. Product Updates Information provided in this podcast is intended for informational and educational purposes only and may contain views which differ from the views of JPMorgan Chase & Company. For specific guidance on how this information should be applied to your situation, you should consult a qualified professional. For full details, see the show notes on your podcast player right now, the Prosperity at Work podcast is produced by dustpod.io or JP Morgan Workplace Solutions.

Lauren Jenkins: Welcome to Prosperity at Work from JP Morgan Workplace Solutions, the podcast all about equity compensation, financial wellbeing, and more. I’m Lauren Jenkins, head of Executive Participant Servicing at Workplace Solutions.

Chris Dohrmann: And I’m Chris Dohrmann, director of Strategic Partnerships at Workplace Solutions. Today we’re gonna talk about AI but isn’t everyone.

Lauren Jenkins: Hey, it’s a fact of life, Chris. It’s used everywhere from movies to health tech to transportation logistics, and it’s even driving cabs in some cities. AI is here to stay. But today we’re gonna talk about the impact AI is likely going to have on equity compensation, benefits, HR, and all that good stuff in the coming year.

Chris Dohrmann: And I think we’ve got the perfect guest here with us today for a deep dive. We’re joined by Charese Smiley, executive director, AI research director, natural Language Processing at JP Morgan. Charese, welcome to the show.

Charese Smiley: Thank you so much.

Lauren Jenkins: Just like me, many of our listeners won’t be experts on AI. So can we start with you telling us what you do for a living? Maybe just the CliffNotes version.

Charese Smiley: As you mentioned, I work in natural language processing, so it’s called NLP, and it’s a subset of artificial intelligence. The natural language part is just about how we handle, or work with human languages, and then the processing has to do with computers and getting computers to do things with natural language. So, what I do day to day is try to get computers to understand text and even generate text, which is what I think a lot of people are being exposed to now, with the rise of LLMs.

Charese Smiley: Within the context of the bank, we try to see whether or not we could apply NLP techniques to financial documents, so we go around and we meet with different business teams within the organization who might be wanting to use AI to automate some part of their workflow or some part of the process that they have. We try to see if it’s something that we could work on together with them, and we collect their data, we analyze it, we build models to scale for them, and then we continue to iterate with those business partners until we find a solution that they’re happy with. So that’s one part of my job.

Charese Smiley: And then the other part of my job is being a public facing researcher, and that part is really exciting. So I and the rest of my team, we get to work on problems within financial NLP. We often write papers and submit them to conferences and journals. And the types of venues that we would target would be the same ones that anybody at an academic institution would also submit their work to. We give talks, we organize workshops and tutorials, and we try to fully participate within the research community as a whole and try to keep JP Morgan as the best bank for AI adoption as it is right now.

Chris Dohrmann: One thing that we do in IT and finance is we use a lot of acronyms. So I just wanna make sure that the audience knows. An LLM is a large language model. And one of our big predictions where we were talking about 2025 and what we would predict is that AI will have a huge impact on the workforce and compensation and equity compensation in particular. One area that comes to mind is in, when we’re talking about that, is around data security. What are the risks that people should be aware of with LLMs?

Charese Smiley: I think one thing that I think people forget, I tend to forget often, is that the data has to go somewhere. And one of the things I like to bring up is when you send a text message or you send an email message or something, you might be well aware that okay, there’s a copy of the message on my phone or on my system, and there’s a copy, if I’m sending a text message to you, you have a copy of it. But we kind of forget that also the company that we’re using to send these messages back and forth, they also have a copy of that data.

Charese Smiley: So when we interact with an LLM, a large language model, a chatbot, we also have to be aware that there’s a company on the other side who is receiving the data that we’re sending in and sending us back responses. And so we need to be very careful when we’re uploading proprietary company documents into a chatbot or into an LLM because it is going out to a company somewhere, whichever one that we’re working with. And then we become subject to how they maintain their data.

Charese Smiley: So if they get a data breach, it could leak out our company proprietary data, or if they have that data and they use it to do their iterating, to train another version, the next version of the model that they build that comes out, then it could leak to other competitors as well, when they ask questions about what our company is doing. So that’s not to say that you shouldn’t use LLMs at all, you should just use them within whatever your company’s guidelines are, so if you have one in-house that you know is specifically built and tailored for your company and that your company allows you to use, then you can upload the data there and you can interact with it there, but never taking it outside of the company’s data system.

Charese Smiley: And then if you… I imagine many HR professionals have to work with very, very sensitive data, you might even be aware that within your company walls, you may not want to upload very sensitive data, because if it’s used to retrain the model even in-house, then people within the company who may not need to have access to that data could get access. So just make sure that you understand very well what the guidelines are around the data that you have within your company.

Lauren Jenkins: So let’s give our listeners a little bit of insight on the basics using LLMs as an assistant. What capabilities does AI have as far as reading or analyzing documents? That seems like something our audience could benefit from if they aren’t already using it.

Charese Smiley: I suppose that there are like, actually two different modes you could use. One would just be to ask questions directly or interact with the model directly, and then you would just get information back based on the data that it was trained on, so this could be anything from the internet. But I think where it’s really been shining for me is, having that ability to upload and search through very long documents for information and be able to ask those different questions about it, or you could upload multiple documents and be able to search across those documents.

Charese Smiley: You could ask for it to tell you the difference between two documents, so I have an older version and a newer version, could you tell me what’s changed between these two documents, which in the past would’ve been something, very tedious. I think on the other side, I really like it for brainstorming and trying to think about different topics, at least for me, when it comes to writing, staring at that blank screen and, trying to think about what it is I wanna write, that’s usually the most daunting part.

Charese Smiley: So you can ask it to help you brainstorm on a topic, give you an outline to start with that can help kickstart your writing on anything that you’re working on. You can ask it to give you arguments from a different perspective than the ones that you’re currently writing about. And I like to ask it to critique my own writing or to review things that I’ve written and say what would you change about this? Could you tell me if there’s anything missing? Have I overlooked anything? Or where can I make thing a bit more clearer? And I’ve found that from an assistant perspective it really shines in that way.

Chris Dohrmann: Many of our listeners will be familiar with, you brought up the fact that it can review large documents for you. And many of our listeners will probably be aware of the fact that HR departments are already using it to analyze resumes, but that brings up another issue or area of concern or one of the risks involved. Tell us about bias and how bias can come into this.

Charese Smiley: Yeah. Bias is a a huge topic when we think about AI and then especially with the rise of LLMs and people using LLMs on a day-to-day basis. I think one thing to consider is the way that these models have been trained. A lot of them have used vast amount of data from the internet as a part of their training, and while it’s made them very, very powerful tools, we have to understand that this data is historic in nature. All data is historical in nature, right? So it becomes a snapshot of a point in time in history, or a point in time in society, and with all the good, bad, and the ugly that data from the internet has within it. But thinking about that snapshot, it may not be exactly what we wanted, when we were thinking about from a hiring perspective, for example.

Charese Smiley: So while we may want it to just focus on the characteristics of an individual job seeker, such as what their skills are, what their training is, what their experience is, it may be learning broader patterns in society such as if the person is applying for civil engineering position that okay, maybe it was 80% male, 20% female, just throwing some numbers out there, and it may seek to replicate that in the future, with data that you’re putting in there. If you’re asking it to score or to screen a resume, it may then inadvertently score a resume with a male sounding name higher than one with a female sounding name, just because it’s learned that there’s some sort of pattern in society where males are typically more hired or have historically had a particular position more often.

Charese Smiley: And then it just kind of trickles down. Like say you say, okay, I’m gonna take all the names off of the resumes before I upload them, it may still be able to learn things from the person’s address because address information, especially in the United States, are heavily attached to different demographics, so it may learn demographic data just based off of where you live. Say I take that off, it may learn things about me from the clubs and the associations that I have listed on my resume, such as, oh, was I a member of the Society of Women Engineers? Did I go to the Grace Hopper Conference for Women in Computing? Was I in a certain sorority or fraternity?

Charese Smiley: Was I an Eagle Scout? Which until recently meant I was a male and it may still score me on those things. And then even if I could take all of those things out, it may learn something just about the patterns and the ways that different people talk that may be associated with their own demographic background, and it may apply that to the way that it rates the resumes. So I’m not against actually using these as a tool to help with screening, but I think that we need to test systems very carefully to make sure that we’re not injecting unwanted bias into our hiring process.

Lauren Jenkins: Another big trend this year is likely to be pay transparency with state level laws in places like New York becoming more of the norm. How should companies be thinking about leveraging AI to deal with these potentially vast amounts of data?

Charese Smiley: So as we mentioned, AI is a very powerful tool, and we’re able to input all kinds of data into it. So we talked about things like experience and job skills, location and salaries. And you know, while we talked a little bit about bias, it can also help us to identify disparities and it can help us to benchmark against market trends, which will help maintain a competitive advantage. So I think ultimately AI can empower companies to make more educated, informed decisions than they would make without it.

Chris Dohrmann: I’ve heard you speak before about the creative aspect of working with an LLM and that’s near and dear to my heart as I do have a technical degree, but I have a liberal arts major. So specifically how to write prompts for an LLM. Can you give us a quick guide so that our listeners can get some kind of insight into that aspect of it?

Charese Smiley: Sure. I think the more detailed we can be when we write a prompt, the better outcome you would get in the response that you use. So one technique that is often used is to create a role or a persona that you have the LLM respond to. So you could say something like, imagine you are an HR manager at a Fortune 500 company or something like that to kind of kickstart off the prompt and then tell it exactly what you want it to do. So you could be really specific about the type of output that you’re looking for, you could say something like, be concise or be detailed, or I wanna have three paragraphs about this topic, or could you give me the top 10 bullet points.

Charese Smiley: Another way that we often interact with these is to provide examples. So you could provide different examples of different inputs and outputs that you would like to see. So kind of a high level example might be for a translation exercise where I give it, English sentences and French outputs, right? French sentences that I want for the translation, and I give it a certain style that I’m looking for. But basically I’m saying, “Okay, here are three different examples of the type of output that I would like you to give me.”

Charese Smiley: And it does a pretty good job of following along with that. But that could translate to something like “okay, here are some emails that I’ve written in the past. Could you write something in the same style?” “Here’s a document that I’ve written in the past. Could you write something in the same style?” And it does a good job of mimicking the type of examples that you give to it.

Charese Smiley: And then if you go in a different direction and you wanna work on more of a reasoning task, you could actually ask it to think step by step. So you could say, provide me your logic for answering the solution step by step, and it’ll show you how it’s working through a particular problem and give you all of those details, one by one, and that can be really interesting to see.

Charese Smiley: It can also help you to pinpoint if you feel like the output from the LLM is going wrong and you don’t know why it’s not giving you the right answer, you could ask it to provide it again, step by step, and you might be able to see where the logic is going wrong and understand a little bit better about the response that you got, or we’ve seen examples where it actually corrects itself after you ask it to go step by step, then it’ll say like, oh, but actually this and then it’ll give you the correct answer at the end. So that’s another way that you could prompt your LLM to get a better response.

Lauren Jenkins: Very helpful tips. Charese, thank you so much for joining us today.

Charese Smiley: Yeah, thank you very much for having me.

[music]

Lauren Jenkins: Next up, we’re excited to welcome Travis Dingledine, executive director, workplace product director. Travis, welcome to the show.

Travis Dingledine: Thank you for having me. Glad to be here.

Chris Dohrmann: So Travis, in what we call our quick fire round, we’d love to hear more about how we are thinking about AI here at Workplace Solutions. Let’s start with an easy one. Can you tell us about your role and how it relates to this episode’s AI topic?

Travis Dingledine: Yeah, so I oversee a number of product areas, for workplace solutions. And my teams are using AI every single day to shape the products that we’re building for our customers. So whether that’s incorporating design thinking principles and using recordings and anecdotes of customer feedback to translate that into jobs to be done so that we ensure that we’re solving real life problems, with the tools that we’re creating for our customers, even to, our engineers are using artificial intelligence to help draft code to really increase our delivery pace, so that way, we can go to market with commercial features at a much, much faster pace and deliver exciting experiences for our customers. So we’re really integrating it in our day-to-day here in, Workplace Solutions.

Lauren Jenkins: At a high level, how much focus would you say is being put on the use of AI in Workplace Solutions here at JP Morgan?

Travis Dingledine: Well, JP Morgan’s done something pretty incredible, and has democratized the use of LLMs as an assistant for every employee. So every single employee of Workplace Solutions has their own fully compliant, fully private version of an AI assistant that you can have on your desktop all day, every day to help you improve communication, to tackle a lot of that no joy type of work that we all kind of wish would be off of our plate, improving processes, et cetera. And it’s just sort of like a new way to work to empower yourself and sort of supercharge your own efficiency throughout the day and frankly, efficacy in many cases.

Travis Dingledine: And then there’s obviously business specific use cases as well, so we’re on the precipice of really incorporating AI in some of the ways that we change the way that we present our business to our customers as well, so it just feels like we’re on this… At this sort of a transformative, inflection point, which is, really exciting to be a part of and to shepherd.

Chris Dohrmann: So, Travis, what do you think are the biggest AI related challenges that you expect this year?

Travis Dingledine: Well, last year was a pretty interesting year in the sense of, and I have to say, I’ve been at JP Morgan for quite a long time, and I’m very impressed and proud of the way that we’ve leaned into AI as the future of our business. And so the work that’s been done so quickly to create toolkits internally so that we can actually use AI again compliantly rather than being really scared of it and sort of tiptoe around it, we’ve done so much of that hard work already.

Travis Dingledine: So actually the hardest part right now is just adoption, which isn’t, the most exciting answer perhaps but we’re at this point where using AI all day, every day is not quite a muscle for every person yet, and there’s just a little bit of a period of time here where we need to get over a hump where this becomes a reflex in that you’re actually augmenting yourself, in your day to day versus sort of just not quite sure how to use it just yet.

Travis Dingledine: And then I think the other thing, that’s really cool is that 2025 is the year that we start to roll out productionized use cases so that we’re actually incorporating AI in the way that we do business rather than kind of being in this place where we have all these really cool POCs, but it hasn’t quite transformed the business yet. So adopting those new tools and frankly just changing the way that you work is what we’re trying to tackle, going into 2025.

Lauren Jenkins: Focusing on one specific example, can you talk about the success we’ve found using a large language model to better equip our service teams to support participant inquiries?

Travis Dingledine: Yeah, so this is one of those business specific use cases where we’ve built a workplace copilot for our service teams and one of the things that we’re really well known for is the human touch of service, as you know, Lauren. But you can imagine with all the different customers that we have, it’s so hard to know every single nuance and detail, ’cause it is literally different for every single client. And then to apply it to an individual employee who’s live on the phone, with questions about their situation within the context of their specific company. So we’ve leaned into sort of the bread and butter of LLMs, which is synthesis.

Travis Dingledine: And so now our service agents are going to have at their fingertips, when an employee calls in with a question access to all of the information related to that employee and that company served on a platter for them. So that way, they can quickly answer and very accurately answer service requests. And again, that just is gonna continue to be something that’s really important for our business is that we have all these great digital platforms, but that human element in terms of service and customer relationships is really, really important and we’re only gonna get better at it from here.

Lauren Jenkins: Definitely. I can certainly attest that this is an efficiency game changer.

Chris Dohrmann: Last question, Travis. Can you give us a sneak peek to any exciting concepts you are currently researching?

Travis Dingledine: Sure. There’s a lot of really interesting things happening behind the scenes in terms of proofs of concepts and really cool ideas that we’re working on. One that I think is really interesting is we offer services to executives and executives have a really kind of difficult problem in terms of the equity that they’re compensated with and their ability to sell for other needs and goals in their life. And oftentimes, that results in them having to create a 12 month sales plan, looking out into the future and is often kind of transactional in nature. But what’s really happening is that they’re selling their stock to solve a goal they have in real life with their family’s financial picture, whether that’s long term diversification, a short term cash need, et cetera.

Travis Dingledine: And so what we’re using is, natural language processing to be able to input the client’s intent, so the real goal that they’re trying to achieve with their balance sheet in real life with the sort of transactional nature of the holdings that they have and ultimately creating a trading schedule. And so this has been really fun to work on because not only does it help us scale this sort of subject matter expertise or this service across a wide range of advisors who may or may not be super familiar with how to do this, but it ensures that we’re leading with the human element. These are not hedge funds, these are people and they have real life financial goals that we’re trying to solve for.

Travis Dingledine: And so in addition to the scale, it just makes sure that we’re always putting the client’s goals first, so that way ultimately when we do transact, the outcome’s fully aligned with what they’re trying to achieve. And so that’s kind of neat because it’s bridging this gap between the efficiency gains that we’re seeing now in LLMs with synthesis, processes, et cetera, but bringing that human element in the way that we give advice can ultimately be a first baby step in being transformative in the way that we provide wealth management services to our customers.

Travis Dingledine: All of these are really, fun to work on and you hear all of these concerns about AI sort of limiting human creativity or taking place of human creativity, but what I’m actually seeing here is creativity blossoming and ideas can come from anyone and anywhere and any person can even incubate them on their own with these tools. So I think this is a really exciting time for us, as a business and also just when, even just think about your own fulfillment as an employee and building a business, you’re just so much more empowered these days with these AI tools.

Lauren Jenkins: Totally agree. Travis, we really appreciate you joining us and sharing your insights today.

Travis Dingledine: Thank you very much.

[music]

Chris Dohrmann: And that’s it for this episode of Prosperity at Work from JP Morgan Workplace Solutions.

Lauren Jenkins: And as always, if you’ve made it this far, thanks for listening. If you enjoyed this episode, we hope you’ll review, rate, and subscribe to JP Morgan Workplace Solutions Prosperity at Work, wherever you get your podcasts.

Chris Dohrmann: You can find more insights on equity compensation, financial wellness, and more by following us on LinkedIn or over at globalshares.com, where you can also download our new global equity compensation survey report.

Lauren Jenkins: Until next time, that’s Prosperity at Work. Bye.

Chris Dohrmann: Bye.

Lauren Jenkins: Information provided in this podcast is intended for informational and educational purposes only, and may contain views which differ from the views of JP Morgan Chase & Company. For specific guidance on how this information should be applied to your situation, you should consult a qualified professional. For full details, see the show notes on your podcast player right now.

Chris Dohrmann: The Prosperity Work Podcast is produced by DustPod.io with JP Morgan Workplace Solutions.

Lauren Jenkins: You’re listening to Prosperity at Work from JP Morgan Workplace Solutions. The podcast all about equity compensation, financial well-being, and more. I’m Lauren Jenkins, Head of Executive Participant Servicing at Workplace Solutions.

Chris Dohrmann: And I’m Chris Dohrmann, Executive Director of Strategic Partnerships at Workplace Solutions. Lauren, I can hear a faint ringing right now, and I can’t tell if it’s sleigh bells or if it’s just the sound of everyone’s computer shutting down at the same time. But before you check out, dear listener, get a view of the state of equity compensation with our new survey. Download the report now at the link in the show notes.

Lauren Jenkins: I know I’m feeling ready for a break, Chris. So what do you say we take a look back at the year that was in the world of rewards and benefits and a look forward to 2025?

Chris Dohrmann: Oh, no. This isn’t good. My worry here is you’re gonna make me go back and look at all my predictions of 2024, aren’t you?

Lauren Jenkins: Consider me your own personal ghost of Christmas past. Let’s start with a look at those forecasts you made this time last year on the show. Okay, let’s take a look at your first prediction. It was on the return of M&A activity that we’d see an increase this year. How’d that one turn out?

Chris Dohrmann: I think I was probably a year ahead of myself. There was an increase in activity from 2023, but it’s not what I really expected it to go back to 2019 and 2020 when they were record years. And that’s probably out of my control ’cause I think it had a lot to do with when the interest rate cuts took place later in the year. I may be able to say I recaptured some of it, but I think this was a miss. And I think I was probably a little too optimistic about when the interest rate cuts were gonna be.

Lauren Jenkins: So the next thing you predicted was the end of the great resignation and the equity awards would be skewed much more towards high performers as compared to retention.

Chris Dohrmann: In this case, I think I was probably right. I think there’s still worry that people in STEM are gonna be very hard to replace. So they’re very competitive as far as equity awards, especially in certain sectors like biotechnology, biopharm or anything that’s really reliant on R&D. But generally, I think the great resignation has slowed. And I think we can see that almost directly by virtue of the fact that what was a shortening of vesting periods, down to almost three years as a norm has now gone back up to four years or is starting to go back up to four years. So I think this was probably on target as far as a prediction. But if you’re gonna be a real stickler, you could say that some sectors are still experiencing concern for lack of being able to control the attrition in certain areas.

Lauren Jenkins: That’s fair. It’s a very powerful tool to be able to use for retention. So, makes sense that that’s still going to be there to some extent. Next up, Chris, you predicted that AI would make a big impact on HR and total compensation, helping with reporting, getting things done quicker. I know this has been a huge theme over the course of this year, but were you right?

Chris Dohrmann: Let’s think local. You and I have access to an AI tool at JP Morgan, and so do many other people, including some of the big four, Deloitte, KPMG, both have access to their own AI. So what they’ve done and what JP Morgan has done is make sure AI is available to it’s employees when they need it. But it’s not gonna allow data to go up and out to the broader internet, which I think is good ’cause it affects a couple of the other areas we’re gonna talk about. If you talk about whether I was right or not, the SEC publishes their areas of examination every year. And there are three areas that we will talk about or probably have. One of them is AI, when they talk about listed companies and examinations and audits. The other two are cybersecurity and a little crypto. So we’re not gonna talk about crypto, but cybersecurity for sure, as it relates to data privacy.

Chris Dohrmann: So that’s the SEC. The other part is if you just look at the company’s spend and so the private sector spend on AI, it’s probably upwards of $150 billion this year, and based on basically big tech is the majority of that. But if you look at OpenAI’s valuation, what was, I believe, in $80 billion valuation in February is now close to $157 billion valuation in October. So I think the rest of the private sector and commerce in general thinks AI is looming, and I’m not sure it’s a bubble. I think everybody is afraid of the AI bubble, especially in investing. AI has been around for 10 years. This is really the next step for generative AI, where AI becomes a tool, whether or not it’s something where you’re bouncing ideas off an AI, whether or not you’re having AI reformulate your writing for a different tone or a different audience. Or whether it’s not, it’s just making research and search for the internet much more efficient. I think those things are gonna keep happening. And I think the rest of the industry is gonna continue to invest in it.

Lauren Jenkins: Absolutely. It’s been really incredible to watch over the last year or two how things have really become ingrained in our day-to-day. And we’re using these tools for, as you mentioned, nearly everything that we do.

Chris Dohrmann: Have you started using the one that we’ve been given as JP Morgan employees?

Lauren Jenkins: Yes. So we’ve started to think of a number of different uses for it from rewriting responses, helping research. It’s been very interesting.

Chris Dohrmann: I think rewriting, especially for an audience and making sure your tone doesn’t sound off, I think is really an added advantage that we can use almost immediately, and then… So it really helps us sound more personal. So, it’s not just a technology tool. It’s something that helps us remember or to think about how each audience likes to be spoken to or communicated with on their own terms.

Lauren Jenkins: So we also had a prediction on cybersecurity that protection was going to be very profitable and AI and cloud computing was going to change everything. How did we do on this one?

Chris Dohrmann: I would say we, it was probably almost there. So, going back to the SEC’s priorities, cybersecurity is one of them. So they think it’s going to be something that they have to keep watching. I think the fact that CrowdStrike and their miss in certain things earlier in the year came back and the valuation has gone back up, whether or not it’s something they did or whether or not it’s people realize that cybersecurity is very complex and it’s gonna take a lot of things to do that. And I think the fact that we’re subject to cybersecurity training every year. And it’s something that’s in the forefront of all the financial industry about something that we have to be very cognizant of and very judicious with because it’s something that happens. People are trying to penetrate our protections almost every day. And we have to make it, something that’s top of mind thinking. And I think all of the companies that are going into it, it’s well worth their spend because it’s gonna be very profitable.

Lauren Jenkins: Right. Cybersecurity has to continue to evolve as AI and these other tools evolve and give fraudsters more powerful ways to get past our protections.

Chris Dohrmann: And I think what I was most worried about there was the fact that AI is gonna be the key that unlocks the Pandora’s box of big data. So the more data that’s gonna be out there, the more data that has to be protected or the more data that’s gonna be vulnerable. That’s why I think cybersecurity is gonna continue to be something that’s gonna be at the forefront.

Lauren Jenkins: So as a follow up to our recent podcast on pay transparency, we also had a prediction here as it relates to that. So that there would be continuing evolution in jurisdictions like New York and California. What are your thoughts on that?

Chris Dohrmann: I think this is still early, but I think it’s a hit. I think I did at least identify this as a trend. And pay transparency is already a reality in Europe. So most of the folks or most of the companies that have their second largest population of employees in Europe are already dealing with this. And I think whether it’s pay equity, whether it’s pay equality, or whether it’s pay transparency, all of these are gonna continue to evolve and be something that’s at the forefront of boards and discussions that are on corporate boards, and whether or not it’s gonna be something also as part of the regulatory process.

Lauren Jenkins: It’s been kinda fascinating to see as we watch even just job postings and pay ranges posted there, how much more common that’s becoming, and you can imagine that the market is going to kinda demand that as we go forward. Job seekers are going to be more used to seeing that information and they’re going to expect to be able to see that up front.

Chris Dohrmann: Agreed. I really think that now that people realize that pay transparency is something that’s a topic for discussion, I think employees realize that their pay scale should be something that’s available to them, and it should be something that they’re very cognizant of. So it shouldn’t be what I’d like to make. It should be, I’d like the job that pays this, and I think I’m qualified for it, and I think we are well-suited for one another, the job and I.

Lauren Jenkins: So final prediction, pay versus performance. The institutional investors and proxy advisors would recognize that equity and pay transparency is probably part of good corporate governance. You did caution that this one might come in 2025. So what’s the verdict?

Chris Dohrmann: And I think I was probably closer on the latter, my caveat there. I think that ISS and Glass Lewis are gonna make pay versus performance part of their terms that they come out with or part of their guidelines. It’s just they didn’t do it for 2024. And I think that they were basically waiting for what is usually their wait period is usually two years after a new regulation. They start making it part of their guidelines. I didn’t see it in 2024 and I haven’t seen any early indications for 2025. But I do think that pay versus performance is not gonna be, it’s not gonna go away. I think people have, there’s been a cottage industry that’s almost grown up around it as far as making sure that corporations are able to do that. And I think it’s something that the guidelines will come out even in a soft way from the proxy advisors in 2025. So, again, I think I, I’m not to say I’m gonna miss there, but I think it was probably too early and I was probably too aggressive in my prediction.

Lauren Jenkins: Fair enough, Chris. We’ll keep an eye on how that one continues to evolve.

Chris Dohrmann: So now that I’ve been held accountable for my predictions, let’s talk about the ones where I was probably closer and was able to say I made an accurate prediction. Let’s talk about AI first. And if I could, let me see if I can get you to go first this time. AI, what do you think is gonna happen for next year?

Lauren Jenkins: Absolutely. So let’s talk about AI. As we touched on, I think a lot of companies have gotten their AI closer to where it needs to be in terms of licensed data pools, ring-fencing LLMs, protecting that data. So it’s interesting to see how things are going to continue to grow and change from here. My prediction is that AI is going to transform compensation and benefits roles next year.

Chris Dohrmann: Where do you think it’s gonna be able to do that? In what areas do you think AI is gonna help most?

Lauren Jenkins: I think that being able to use AI to monitor things like compensation across bands, across different roles or functions, it allows you to look at things a lot more holistically than maybe we’ve been equipped to do in the past. So I think it will be a tool, an important tool for people working in compensation and benefits to be able to better leverage data.

Chris Dohrmann: And I think you’re right. I think people realize that they’re using it already to monitor incoming resumes and CVs. And that’s something that’s being regulated, particularly by the city of New York, and making sure that there’s some audit there to make sure that there’s no bias. But I think people are gonna realize they have access through the AI to a wealth of data that they’ve had internally, whether it’s internally at a company, for a decade or more. And they can start to compare that to their peers. So they can start to structure compensation packages and the amount of equity offered, and to tailor that so that it can be competitive and it can meet the needs of the workforce they’re trying to attract. So I think they’re gonna realize that AI is gonna be able to do much more by culling data or reformulating data or making data available at their fingertips, much more so than they’ve ever been able to do before.

Lauren Jenkins: I know we’ve touched on before in our discussions, Chris, that AI has the potential to eliminate about 87 million jobs, but it’s predicted to actually create about 97 million. So you gotta embrace it. You’ve got to make it part of what you’re doing so you don’t get left behind.

Chris Dohrmann: And I think what I was trying to say before when I was talking about the fact that people are afraid of AI and whether or not it’s gonna be their job is going to be at risk. I don’t think people are gonna lose their job to AI. I think people may lose their job to somebody using AI, at least better than they are. So I think that’s what the risk might be. So prediction two, here’s one where he talked about how whether or not I was right or wrong about pay transparency. But my prediction is, that pay transparency is not going away. And we talked about it a little bit in the prior section. But I still think pay transparency’s first start is a job architecture. And do you see that coming about in 2025?

Lauren Jenkins: I do, I think that a job architecture is going to be essential to really accomplish pay transparency. So being able to outline which roles command which types of compensation, really the only way to address things like perception issues and making sure employees have that visibility and understand what may lay ahead for them.

Chris Dohrmann: I think you’re spot on. I think the fear that most people, most corporations have about pay transparency is what are we gonna do when people realize that they were hired at different salaries? And I think the first thing they can do is say, going forward, we’re making sure that you’ll know what your salary is before you’re hired, and you’ll know what your range is before you’re hired. And that way, it’s not gonna be the great unknown. It’s going to be you’re being hired for a position that pays this range, and your next progression in career goals is going to be to a new position with a new career range. So it’ll all be laid out and very transparent for people not only currently working for the company, but job seekers.

Lauren Jenkins: Right. And like we touched on earlier, as this becomes more and more common, the market will demand it. So applicants are going to expect it. Companies are going to have to start making that more transparent. So let’s move on to an issue that is touching really every sector. So our third prediction is that 2025 is going to be the year of doubling down on cybersecurity. So it’s going to be more important than ever.

Chris Dohrmann: And I think it’s gonna be more important than ever to people outside. Now, in this case, I would normally just say, areas of the company, like I think IT has been basically paying attention to cybersecurity for years. But I don’t think people in other areas of companies have been paying as much attention. I think those days are over. And I think the sectors that have been paying attention to cybersecurity, like finance, I think they’re not gonna be alone anymore. Because I think the penetrations or the risks that have happened or the cybersecurity exposures of data have come in all sorts of industries, including insurance, including medical insurance or medical areas. So I think basically US industry and the US private sector in general has to be paying attention to cybersecurity more so than ever because there’s more data there and more data being available and kept at fingertips, especially the things like AI, than we’ve ever had before.

Lauren Jenkins: Exactly. Going back to the AI point, the proliferation of misinformation is happening quite quickly. So being able to keep the reins on that and help decipher what is real versus not. Knowledge is power if it’s safe. If you start throwing in misinformation, it can diminish things that are really valuable, like these powerful AI tools.

Chris Dohrmann: Yeah, it’s funny how people realize that their investments are valuable, but they don’t realize that their investment in the knowledge and the data that they have, is probably equally as valuable. Because it’s what makes, it’s the tools that make investments or wealth accretion available for them.

Lauren Jenkins: 100%.

Chris Dohrmann: And for the fourth and I guess final one, let’s talk about data privacy and what can people do about, or are people gonna be paying attention to their personal data privacy in 2025?

Lauren Jenkins: Absolutely. So I think with things that we’re continuing to see develop GDPR and other types of regulations along those lines, this is going to be something that consumers are increasingly aware of over time and I think demanding increasing levels of data privacy.

Chris Dohrmann: I’m gonna try not to be judgmental in my… But I’m just saying regulators in general are not usually very proactive. They’re usually reacting to what their constituents want to see. And I think regulators in more and more US states are trying to do what GDPR did in the European Union years ago. So I think the fact that more and more states are starting to pay attention to their constituents’ data privacy, I think resonates. I think the fact that it’s really become a prime concern for constituents, as well as the regulators that are trying to protect their concerns.

Lauren Jenkins: I totally agree. And as things continue to impact those constituents, like identity theft or other repercussions of lack of data privacy, the demand for that is only going to increase.

Chris Dohrmann: And lastly, I think people are starting to pay attention that they can’t just leave data when they leave an app or when they leave a company. They should ask for their data to either be purged or they actually be exported. Whether it’s a new doctor, whether it’s a new banker, whether it’s a new relationship, whether it’s a new employer. I think they start to realize that leaving data is tantamount to just leaving it exposed. So they wanna do a little bit more control of that.

Lauren Jenkins: So I do have one more topic for you, Chris. One more prediction. I think the SEC oversight will increase next year.

Chris Dohrmann: See, I would have agreed. I think the SEC is already was fairly aggressive this year. And I think based on the areas that they’ve talked about as far as their priorities, their priorities aren’t new. Their priorities are… Many of them were repeats of 2024. So I think you’re right. I think they’re gonna try and continue to be more judicious in data privacy, cybersecurity, and AI. If they explore crypto, so be it. But I think that they have a lot on their hands just to address the emerging AI technologies and emerging data threats with cybersecurity. So I think you are right, they’re probably gonna be a little bit more aggressive because I think those areas are monumentally, are moving very quickly and the traction that they’re getting is monumental.

Lauren Jenkins: Right. Regulations have to keep up.

Chris Dohrmann: That brings us to the end of this episode and to the end of an epic year of Prosperity at Work from JP Morgan Workplace Solutions.

Lauren Jenkins: If you’ve made it this far, thanks for listening. And if you’ve enjoyed this episode, we hope you’ll review, rate, and subscribe to the JP Morgan Workplace Solutions Prosperity at Work podcast, available wherever you get your podcasts.

Chris Dohrmann: You can find more insights on equity compensation, financial wellness, and more by following us on LinkedIn or over at globalshares.com, where you can always download our new Global Equity Compensation Report 2024. Until next year, that’s Prosperity at Work. Happy holidays.

Lauren Jenkins: Happy Holidays.

Chris Dohrmann: Information provided in this podcast is intended for informational and educational purposes only.

Lauren Jenkins: It may contain views which differ from the views of JP Morgan Chase and Company. For specific guidance on how this information should be applied to your situation, you should consult a qualified professional.

Chris Dohrmann: For full details, see the show notes on your podcast player right now.

Lauren Jenkins: The Prosperity at Work podcast is produced by dustpod.io for JP Morgan Workplace Solutions.

Lauren Jenkins: You’re listening to Prosperity at Work from JP Morgan Workplace Solutions, the podcast all about equity compensation, financial well-being, and more. I’m Lauren Jenkins, head of executive participant servicing at Workplace Solutions.

Chris Dohrmann: And I’m Chris Dohrmann, executive director of strategic partnerships at Workplace Solutions. So, Lauren, what are we talking about today?

Lauren Jenkins: Well, Chris, I’m gonna throw something at you which can feel like a buzzword or potentially a corporate box ticking exercise, but it’s actually vital to the interest of the modern workforce and the success of many businesses. So today, we’re talking about diversity, equity, and inclusion or DEI.

Chris Dohrmann: You’re right. DEI has a major impact on the well-being of companies and employees alike, as well as just being the right thing to do from a human perspective. So let’s dive in.

Lauren Jenkins: All right. Today, we are joined by the man who has maybe the best dataset on DEI in the US right now, Stefan Gaertner, partner and global people analytics lead at Aon based in Los Angeles. Stefan, welcome to the show.

Stefan Gaertner: Thank you, Lauren. Thank you for having me.

Chris Dohrmann: First, let’s get some context. Tell us a little bit about Aon, your role in the business, and what gives you a unique perspective on DE&I.

Stefan Gaertner: So I came to America. You’re probably about my accent. Originally, I’m from Germany. I came to America almost 30 years ago to get a PhD in Human Resource Management. A t Aon, my role as a people analytics lead is basically provide clients advice on people analytics, but also to look after that great data that AON. The data that AON has comes from 1,000s of our clients who send us compensation data, but also data on promotions, turnover, gender, ethnicity. So I see a lot of that information, and of course, I use some of that information to work directly with clients to support their diversity and inclusion initiative. I have worked in this topic for a long time, but I’m also approaching it from a very factual basis. What is the current situation? How does it impact the business? How does it impact employees and so forth? I think that’s really my unique point of view, the point of view that I can bring to the table. Yeah,

Lauren Jenkins: That’s wonderful. So you must have some great data on what the leading companies are doing from a dei perspective. Can you share some headlines?

Stefan Gaertner: So when it comes to human capital, most organizations have really good data on gender and ethnicity, especially in the United States, and the best in class organizations, they use their data to monitor hiring, to monitor promotions, to monitor performance management systems, to make sure that all of these systems are fair. That’s number one. Most of the leading organizations, they also do a pretty thorough job monitoring pay equity. Pay Equity is basically all about are we paying equally for men and women and employees with different ethnic backgrounds who do similar or identical work? So they have big programs in place to monitor and improve pay equity in an ongoing basis, that’s number two. And number three is basically all about communications. So you can’t really have a diverse diversity and inclusion program without paying much attention to how you talk to your workforce. And communication includes things like making sure that the language that you’re using on your website is not biased towards one gender or one ethnicity. Most organizations are thinking about disclosures. They’re thinking about being more open to the world about what they’re doing when it comes to diversity and inclusion. So internal communications and external communications. And the best organizations also, they walk the extra mile in making sure that employees feel that they belong. So they end up forming what is called employee resource groups, or infinity groups. They’re engaging with these groups. They’re supporting people of different ethnic backgrounds to be successful within the organizations. So if I were to pick three, those would be the main topics.

Lauren Jenkins: And are there any specific sectors or industries that stand out in terms of really embracing those things that you’ve mentioned?

Stefan Gaertner: Yeah, there are maybe a couple that I would point out regulated industries or industries that basically draw the attention of the government, and they usually are a little bit ahead of the curve, and that would be, for example, life sciences and biopharma, because their reimbursement depends on money that often comes from the government, so they are very careful about diversity solutions. And organizations that draw a lot of attention to themselves because they are industries that are old and very well known. and I would think about the financial industry there. Some of my clients in the financial industries are doing a lot to make sure that they are seen as front runners in that space. But beyond these sectors, I would think that, I would say that the biggest differences are not really driven by industry, but by all by features of organizations within industries. So in every industry, I can basically point to organizations that do it really well and others that limp behind and two factors that really come to mind are, number one, the price so larger organizations tend to be more concerned about diversity and inclusion, because, yeah I get it, people pay more attention to them, so they have to be more careful. And the other one is really almost random. It’s about who is your CEO, who is on your board, who is interested in this kind of topic, did they get fresh out from their shareholders, who are other interest groups to do more on diversity and inclusion.

Chris Dohrmann: And not to dwell on it, because I think you’ve given a very positive picture of DE&I and what people are doing, but I do want to balance it, because I think the audience can learn from the weak points. What are the weak points and are you seeing many companies struggle or just plain not address DE&I.

Stefan Gaertner: Arguably, many of you is a little bit little bit lopsided because organizations that talk to me, almost by definition, hear a little bit more about DE&I than others. So but even when I talk to those organizations, I would say that one weakness of these programs is that they really only focus on the symptoms and that they don’t really go into the root causes. So it’s one way to think about when you say, hey, we have a pay gap. Let’s provide employees with pay adjustments. That’s one way to fix it. A better way would be, actually, to go back to the root causes. Why do we have that pay gap to begin with? Similarly, with organizations that realize that they don’t have enough women in executive ranks, they go in and basically go through a program that takes one or two years and hire a few women to balance that out, as opposed to really going back to the root causes and saying, why, how did this happen to begin? So I think that’s really a shortcoming of these programs. And then the other thing, and that’s kind of curious, I do see when I work with clients directly, that they’re making a lot of progress when it comes to their pay gap. I’ll share some data, maps data, but I can tell you that if you work for an organization for three, four years, the beginning, they might have 3% or 4% gender pay gap you see how that data gets down over time. But it’s a lot harder to achieve progress when it comes to the employment representation. So it’s a lot harder to basically achieve a 50/50, parity ratio in the executive level between men and women. So as a result, and that’s really interesting to me, because we look at the industry data, we’re basically seeing two snakes – a) the gender pay gap, I’ve been monitoring that for a little more than a decade now, is pretty stubbornly industry wide, at about 2% and it doesn’t seem to get less. And the gender representation gap on executive levels, it’s getting smaller, but very, very slowly. So, if we continue at that pace, we will probably have gender parity when it comes to employment at executive levels in about 80 to 90 years. So progress is there, but it’s really slow. When you look at the data from really from the level that I can look at the data.

Chris Dohrmann: What can we learn from the fact that you’re relating most of these corporations do a little bit of self-awareness check after they come to you to see where they are in the process. Is there anything that you can recommend that they do right off the bat?

Stefan Gaertner: The first thing that you can do when you really look into a diversity and inclusion program is to look at your data and that is super important. Without the facts, you will end up act but not in a very informed way. So if you want to look into the data, and maybe this is a good moment to share some of that, we basically see because of the data that we get from our clients what the state of the art is in diversity inclusions across industries. So I looked at data just yesterday across industries and that I picked life sciences, technology, and asset management. And when you look at the data, you basically learn a few things that our clients would probably learn too when they look at their own data. First, if you look naively at the gender pay gap, you basically look at our 20% to 22%.

Stefan Gaertner: Now what do I mean with naively? So if you take average pay of every man and woman in every organization, you basically see that men make about 22% more than women. Okay? But when you start really slicing and dicing the data, analyze it so that you only compare men and women with the same job within the same job level, you’ll see that the gap is much smaller. We call that the adjusted pay gap, but it’s still there. So among these industries that I just mentioned, life sciences is a little bit better about 2%, and tech and asset management is about 3%. So first of all, when you look at your data and your general pay gap for example makes to compare your number with those numbers to see if you’re basically in the ballpark with everybody else. By the way, when we look at that data, we also learn that Asians, they tend to make more than white employees across the industries to the tune of about 2%. Other races, Hispanic, African Americans, Pacific Islanders, they tend to make about 2% to 3% less than white employees.

Stefan Gaertner: It’s interesting how these results are quite consistent across these industries. So another thing that you learn, that you can learn by looking at your data, you can look at your representation. You can basically see how many women do we actually employ as a proportion to your organization and at what levels do we employ them. So if you look at these three industries that I just outlined, you do see some differences. Life sciences today, we basically see that they achieve gender parity when it comes to employment, the ratios are roughly 50/50. However, when you go to the executive level, you see that women really only make about 35% of the workforce there. So tech is a little bit worse and a little bit worse placed in there. So there you basically see that women make about 40% of the workforce and in executive branch that’s only about 30%.

Stefan Gaertner: So asset management among these three industries is behind a little bit. So the overall operational women in asset management is only 37% and within executive level is [0:12:40.7] ____. So if you’re an organization in these industries, look at your own numbers and then compare yourself and then start to set reasonable targets. Now, I’m not going to go into that too deep, but I have one cautionary story to tell you when it comes about targets, especially about representation targets. So if you are in an organization, let’s take the asset management number as an example, and you have 19% of executives being women and you then go, hey, we need to bring this to 50% in three years.

Stefan Gaertner: I worked for a company that set these kind of targets and I give the math, given their hiring, given their growth, there was no way they could possibly reach the target without actually starting to systematically lay off men. And that of course would be against the law. You can’t do that. So in other words, if you set targets, do a little bit of workforce clinic, do a little bit of looking into the future to make sure what’s reasonable. I’ve just now worked with a client that was chasing these kind of targets for a few years and now they have to pedal back.

Lauren Jenkins: Those sound like some great goals. What individuals within a company are typically involved in executing on those goals?

Stefan Gaertner: To drive the program and to make sure that everybody is aligned and disciplined, it is very, very important that the sponsorship goes as far up into the organization as possible. So, and I’m basically talking the CEO, I’m talking the executive team. They would basically have to sponsor and making sure that everybody understand that this is infact a business priority. So when it comes to setting the targets, however, human resources plays a very important role because human resources knows the data. Human resources can interpret the data and human resources can share the data. Anytime, of course when you work with diversity inclusion data, you also have to get the law department, the legal department very much involved because doing too much could be dangerous as much as doing too little. And the law department can really help provide the right context and it can even protect some of the analytics.

Stefan Gaertner: Beyond that, I think it’s really important to, almost to my earlier point to be clear as to the business impact as to what you’re doing. So setting diversity targets that are too aggressive can do a lot of damage, as I said earlier, through your reputation if you don’t achieve them. But it can also lead to unintended the consequences when you hire the wrong people and drive the wrong people decisions. So as a result, I would always include all sorts of business leaders and that includes finance to make sure whatever target is set are actually achievable. I mentioned HR and there’s another thing that is important here to consider. Beyond the targets, you also wanna be clear that what you’re trying to accomplish is consistent with your organizational culture. A very concrete example. So if you will historically basically hire executives from within, basically make sure that somebody is within your organization for 15, 20 years, really understand the culture before you promote them to executive ranks.

Stefan Gaertner: And quite a few organizations are doing it that way, if that’s what your culture is, you really have to be even more careful setting goals because you don’t wanna put women into a role, into a position where you hire them from the outside against what is typically your policy or when you promote them too quickly because at that point you just set them up for failure. So as a result you really wanna also include people who understand the culture really well and were able to vet what you’re doing, making sure that it’s consistent with who you are as an organization. So that’s really it. And at the end of the day, it means that DE&I is not just an exercise that is being driven by HR or legal or anybody else. It has to be something that becomes part of the fabric of the organization and you have to really include as many people as possible.

Chris Dohrmann: Maybe as my last question here in this section is to ask about something Lauren and I know quite well. Is equity compensation, and I would think it would be, more flexible and maybe a greater tool to use to address DE&I because of its annual nature where you may be able to adjust vesting the amount granted, the amount awarded or even performance targets more frequently than you might be able to do with a larger scale compensation. Plus I think now it’s probably in excess of 50% of an executive’s compensation. So it may impact the total picture a little bit more strongly.

Stefan Gaertner: So we typically recommend our clients to look at pay equity across all compensation towards its base, its bonus, its equity and whatever other components you might have as an organization to your compensation system. When it comes to equity specifically, there are handful of things that make the equity analysis a little bit more complicated. The first thing is, well there are lots of ways to present equity. There’s restricted shares, there’s stock options, there are ongoing grants, there are new hire grants, there are spot grants and so forth. So each of these components would have to be modeled and understood separately, which really adds to the complexity there. The second thing that makes equity complicated is the value that you use. Okay. So if you grant a restricted stock, their value is different the very next day, right? So what we typically recommend is we evaluate equity, have to evaluate on the very day when you provided employees with that equity component.

Stefan Gaertner: So that helps a little bit, but again it basically includes the complexity of the analysis. Also, when you look at equity, you have to model out the eligibility rules because there’s nothing in the law that require you to pay the same amount of equity to everyone. But what it does require you to do is to make sure that people who are similarly situated who basically have the right, the same equity targets, that you treat them the same given their performance in all of that. So that’s another factor that makes equity complicated because we have to put in all of these different eligibility.

Lauren Jenkins: So it seems like human bias plays a big role in all of this. Do you think that’s fair to say? And just expanding a little bit on the things you’ve already touched on, what do you see successful companies do well to manage that human bias?

Stefan Gaertner: Yeah. At the end of the day, when I look at the data and I see this big 22% unadjusted pay gap. When we work with clients, we basically see that a big chunk of that we can explain. Men tend to work in industries that pay better. They tend to work in organizations that pay better, they tend to work in jobs that pay better. So they tend to work more in technology jobs than women and they tend to work in higher job levels. All of that is pretty much the rule based. So the remaining 3% to 5% is really the result of human bias or something else that nobody has ever found in the data. So I cannot prove for sure that it’s human bias, but it’s what remains. So, in all these years, it was really hard for me to see anything else that could possibly explain that.

Stefan Gaertner: And we even looked at performance ratings. So long way of saying that human decision making will never go away. And in my humble opinion, human decision making is quite effective to hire the right people to promote the right people, to give the right performance ratings. But there is this little element in there that we call bias that impacts human decision making. And that element seems to go to the disadvantage of women and minorities. So I think human biases are [0:22:09.6] ____. So what can we do about it? One way is to limit it further. And some clients are doing this, they’re basically trying to take more and more of the human decision making out of the process of setting pay, making people decisions. And I would say that might work to an extent. And the clients who are most aggressive with that, those are typically the clients that are dealing with legal risks that they can’t really handle in any other ways.

Stefan Gaertner: For the other clients, I would say a better solution or an alternative solution might be constant reminders, constant training, constant education of leaders to not stifle human decision making, but basically to make it better. And you basically see that it’s not working perfectly, but it’s working. It’s making things better over time. Just keep in mind, human bias usually doesn’t take the shape or form of somebody going to work in the morning wanting to discriminate against women and minorities. There are people like that, but they are very, very rare.

Stefan Gaertner: The more regular, the more typical form of human bias is the one that we are just not aware. It’s basically we’re making a decision and we have a certain prototype in mind of what a certain person should look like, who has a certain job, and it’s not affecting all of our decision, but it might have a tiny little impact on it, which also basically as I said earlier, maybe 3% of pay and it’s slightly slower promotion rate and higher rates for women over time. So that’s what I would say about human bias. I think organization should not try to get rid of it. Well, we wanna get rid of human bias, but it shouldn’t mean that we wanna get rid of human decision making.

[music]

Chris Dohrmann: So Stefan, now we’re just gonna ask you a couple of short questions that really highlight your insights. So are you ready?

Stefan Gaertner: I’m ready.

Lauren Jenkins: All right. First question is, what three things can organizations do to go about building a diverse workforce?

Stefan Gaertner: Based on my background, probably no surprise that I will start on, start with lean on your data and on analytics, get the fact before you act. The second is don’t try to go into actionism and do something really, really quick. There are organizations who have the most success are consistent, they drive progress over time and monitor progress over time. And then third, don’t think of this just as a regulatory exercise. We actually do have some evidence that diversity drives business success, and frankly, the world around us is getting more diverse and as a result organizations have to adopt and get more diverse along with it. So think of it as a business spec, a business necessity as something that drives business in a positive way and that also will help you stay focused. I think those are the three things that I would mention here.

Chris Dohrmann: In one sentence, and I’m not gonna hold you to that, what’s the major blocker to the improvement and adoption of DEI in the US?

Stefan Gaertner: I would say it’s extremes. One way or the other. People who are too well-meaning or people who are blocking progress that are not in fault, that are basically extremes that are based on the lack of information.

Lauren Jenkins: All right. This one may be a little tricky as well. So if possible in one word or phrase each, what are the biggest three trends in DEI right now?

Stefan Gaertner: All right. I would say globalization of DE&I is the first one. We have a lot of history of that in the United States and in Canada. It’s basically becoming more and more prominent everywhere, growing uncertainty and politicization. The regulatory environment is getting more complicated and like everything else around the world, there’s a lot more opposition building up in both. Now, the whole thing, it gets more politicized and then more of the efforts of societies are becoming involved. So it’s not just the organization and the lawyers anymore, it’s basically activists, sports teams, boards, shareholders. So all sorts of elements within the society is getting involved in the conversation. I think those are the three trends that I’m seeing.

Chris Dohrmann: As the US economy shifts to human capital as opposed to manufacturing, what is the mindset that HR and total compensation folks have to adopt to be more successful in applying DEI to their organization?

Stefan Gaertner: Well, first of all, think of data as being your friend. HR is a lot of data and if you stick to that and if you use the data to leverage the data to make progress, you will be successful. And the other one is just be realistic. Again, the data helps you to set realistic targets. Don’t push too far, don’t push, don’t push hard enough. Just be realistic in what you’re doing. And yeah, the final one is don’t think of this as an HR exercise. Think of this as a business exercise and that’s going to help you be successful.

Lauren Jenkins: All right. Our last question is what is your outlook on the future adoption of DEI measures in the US? Are you hopeful?

Stefan Gaertner: Yeah, hopeful. We made a whole lot of progress over the last few years. I’ve been in people analytics for many years, and I have never seen anything like this progress we made over the last six years. Progress will continue and I will hope for it, but I do expect that it is going, that progress will start to level off over the next one or two years because it can’t really go on at the same speed as it has over the past few years.

Chris Dohrmann: Stefan, thank you so much for joining Prosperity at Work. It’s been a pleasure and please consider yourself openly invited to anytime you want to come back, if there’s a development that you think you need to share with us and our audience.

Stefan Gaertner: Thank you very much, president Lauren, and it was a pleasure to spend this time with you today.

Chris Dohrmann: And that brings us to the end of this episode of Prosperity at Work from JP Morgan Workplace Solutions.

Lauren Jenkins: If you’ve made it this far, thanks for listening and if you’ve enjoyed this episode, we hope you’ll review, rate, and subscribe to JP Morgan Workplace Solutions Prosperity at Work, available wherever you get your podcasts.

Chris Dohrmann: You can find more insights on equity, compensation, financial wellness, and more by following us on LinkedIn or over at globalshares.com, where you can download our new global equity compensation report 2024. Until next time, that’s Prosperity at Work. Bye.

Lauren Jenkins: Bye.

[music]

Chris Dohrmann: Information provided in this podcast is intended for informational and educational purposes only. It may contain views which differ from the views of JPMorgan Chase and company. For specific guidance on how this information should be applied to your situation, you should consult a qualified professional. For full details, see the show notes on your podcast player right now.

Lauren Jenkins: The Prosperity At Work Podcast is produced by dustpod.io for JP Morgan Workplace Solutions.

Lauren Jenkins  0:04

You’re listening to Prosperity at Work from JP Morgan Workplace Solutions, the podcast all about equity compensation, financial, well-being and more. I’m Lauren Jenkins, Head of Executive Participant Servicing at Workplace Solutions.

Chris Dohrmann  0:16

And I’m Chris Dorman, Executive Director of Strategic Partnerships and Workplace Solutions. This week, we’re taking a look at a bit of an emotional issue for employees, as well as an elephant in the room for US companies right now, pay transparency.

Lauren Jenkins  0:30

So from a government to an individual level, there’s demand for transparency on jobs. Like it or not, it’s already here and it’s coming for your state soon, so get ready.

Chris Dohrmann  0:39

This week’s guest has all the insight you’ll need on how this impacts comp and benefits. We’re joined by Nancy Romanyshyn, Senior Director of Total Rewards Strategy and Solutions at Syndio. Nancy, welcome to the show.

Nancy Romanyshyn  0:52

Thanks so much for having me. I’m so excited to be here and talk with you both.

Lauren Jenkins  0:57

Nancy, tell us a bit about Syndio and your role within the company, and how that connects to the issue of pay transparency.

Nancy Romanyshyn  1:02

So Syndio is a software analytics platform. We help companies do analyzes where they can make sure that they are paying people fairly and promoting and conducting performance fairly and consistently throughout their organization. So we provide both analytics through the software as well as expert support, really helping them navigate through things like pay transparency. And the work that we’re doing with so many of our customers is helping them do the analytics to prepare for pay transparency. So really getting a better understanding of how they’re delivering, pay, how they’re promoting people, how people are advancing and moving to their organizations, so that that way they can be more transparent about what they’re doing and make refinements potentially to their programs before being transparent. So we’re just helping our clients really navigate this new world of transparency.

Chris Dohrmann  2:01

Let’s talk a little bit about what repay transparency really means. Where is this new legislative trend coming from? And as a secondary question, what does it really include, both now and maybe in the short term?

Nancy Romanyshyn  2:16

I think it’s a great question, because when we talk about pay transparency a lot of times we think first and foremost of the legislation. So we know that there are so many different regulations across so many different jurisdictions around a variety of transparency requirements. So it may be posting ranges around when you’re advertising for a job. That’s sort of a kind of simple way of looking at it, but I think we know it’s so much more. So what we’re finding is the legislation is saying, well, it’s not just say the range for base salary, but it’s looking at other components of compensation. It’s being transparent around how folks are advancing in your organization. What are those opportunities that they have for advancement? It’s being those types. It’s really looking at a lot more than just pay and I think that’s one of the things that that we’re seeing really emerge. And then I think the other dimension of it, Chris is really thinking about how different jurisdictions come at it. So in the United States, we tend to be, I don’t want to say a little more laid back, but believe it or not, a little more laid back. We’re less prescriptive, and we’re starting to lean into being more prescriptive about what exactly we want employers to post and share and disclose. Where in Europe, you find a lot of the European countries have been more prescriptive. There are specific analytics that they’re asking you to provide to demonstrate that you have fair and consistent pay practices and talent management practices. And I feel like everything’s sort of feeding into itself, and everybody’s sort of learning and borrowing from one another, and that’s really what, what is continuing to emerge.

Chris Dohrmann  4:05

And you read my mind, because that was the point I was going to bring up as a follow up, the fact that in the US, this is almost following the same type of path as data privacy did, where each jurisdiction is going to be either assertive or, as you know, basic as it wants to be, and that’s a problem for employers and employees alike, because they have to navigate all in multiple jurisdictions and then deal with an overarching format, much like the

Nancy Romanyshyn  4:34

EU as 100% agree. I think that’s what we’re hearing a lot from employers, is, you know, okay, I get it in this state or in this country, we have to do this. We have to do this. But, oh my goodness. Like, how do i First, how do I manage the complexity of all that, the patchwork of different legislative requirements, and then, how does that relate the all of these compliance exercises? How does it relate to what we’re. Trying to do from an employee value proposition standpoint. You know, how we this is all about how we value our employees. So how do we have one holistic approach, one consistent sort of set of messaging and way of operationalizing that? So that’s what we’re seeing a lot of you know, most of our our customers are global, so they have many different places in which they’re operating, and that’s what I think is really rising to the surface. Just like you say this, it’s now we’re sort of in this moment where employers are saying, Whoa. We need to have a strategy around this, a true transparency strategy.

Lauren Jenkins  5:36

So pay is personal, but transparency is, of course, public, what is your take on these two opposing forces?

Nancy Romanyshyn  5:43

So I think there’s a convergence. I would say that is happening. I think we are in a place where we need to think about all of that, how I think employees now are part of the conversation when it comes to pay in a way that they’ve never been before, because they actually have access to more information now than ever before. So from this sense of pay being personal, it is getting up to a point where employees have agency. Employees are not just advocating for themselves from that right, emotional, personal place. They’re advocating for each other. That’s been really fascinating. When you see somebody post, hey, I was a marketing analyst at this company. I’m leaving, but I want you all to know what I was making, so that when you apply for this job, you know what you should be asking for, wow. I don’t think we’ve ever seen anything like that before. So I think what employers you know or would do best to do would be to really lean into that and say, Hey, we get it. Let’s have a conversation about how we value your work, how we value your contribution, how we value, how all of that, those values, come together so that and meets our business objectives. This is what we’re trying to achieve with our pay programs. This is how it ties to our business. So these are all the things together, how it works together. This is what it means, then, how we value, the role, the skills you bring, and this is how we’re going to value and how you can advance, how you can build on that. This is how we can share success together. I think that’s really what I’m seeing happen, but I think, to your point, it hasn’t happened that way in the past, so I think there’s a there’s a transition that’s happening right now.

Chris Dohrmann  7:36

Nancy, I’ve heard you talk before, and we’ve seen each other at national conferences and mutual clients. And what I’m struck by is, you talk about, when clients first hear about pay transparency, they have a wait. What response Am I exaggerating that even just a little I

Nancy Romanyshyn  7:54

think now, Chris, you and I have had this conversation about generational differences too, in terms of, you know how some of us feel about transparency. Like you said, you know, pay is personal, and we have to be conscious of the fact that you know, who are the folks in leadership? They’re folks that are, you know, our contemporaries, right? So there’s been this big change management a couple of years ago at one of those conferences, Chris, in fact, what I did was I actually shared my own personal pay history as part of my presentation. And I looked at everybody in the audience and I said, Are you uncomfortable? I’m uncomfortable right now. Did that make you uncomfortable? Because guess what? This is what’s happening so and I want you to be ready to be uncomfortable. And it was, it was extremely uncomfortable, but yeah, I think employers, it’s rare the employer that say leans into it right away. I think there is that visceral reaction when we think about the way we’ve managed comp and design programs in the past, we used to say things like, this is our competitive advantage how we’re paying you, and especially when it comes to beyond base salary, when we’re talking about bonus and equity and and how we structure those programs, I think everybody is realizing it’s all out in the open, so we’re going to have to think of other ways to have a competitive advantage. And I think that’s that’s going to take some time for I think some employers are transitioning more quickly and leaning into that than others, but yeah, I think it’s safe to say most folks are feeling vulnerable about transparency,

Chris Dohrmann  9:30

and you are 100% correct as the oldest person here, I would say that I would rather talk about my medical history than my pay history. So you are spot on one other issue, and I wanted to bring up, is many companies, after the pandemic, may have thrown up an unintentional hurdle for themselves by by having geographical differences when people go from low cost or high cost of living areas and they’ve adjusted salary with pay transparency the same job. Job done in different places may pose a problem. Have you seen that

Nancy Romanyshyn  10:05

prior to the pandemic? A lot of my so I was, I was a long time consultant at Willis towers, Watson, that’s where I spent the majority of my career. And a lot of my clients prior to the pandemic didn’t necessarily have formalized geographic differential approaches. It wasn’t necessarily something they communicated to employees if they were doing it, and they had somewhat different ways that they were doing things. The pandemic hits, and all of a sudden they have all of these remote folks, or they’re deciding who’s in person, who’s remote. How do we navigate this? And the pay issue really did kind of come to the forefront, because then it was, well, wait, I’m not requiring them to be here. And then, oh my gosh, I have employees that are moving across the country that I don’t even know about, you know? So I think what it what it required, was a level of transparency. We’re gonna be saying that word a lot, but it required us all kind of being grown ups about it. And I think there again, you have some employers have been pretty resistant. We’ve had conversations with folks where they’ve said, Wait, we have to post ranges. Now, my folks in, you know, Alabama, we’re gonna have one range, and then the folks in Pennsylvania are going to have another range, and they’re going to see it, and I’m like, Well, yeah, but I bet if you talk to them and said, Well, hey, you’re going to buy a house here versus here, or you’re going to rent an apartment here versus here, I think they know that there’s a different cost of living, so there’s probably a different cost of labor, and you could Talk to them about that and how you’re structuring that, but I agree it’s on the face of it. First it was identifying and sharing. Yes, we we do value labor differently depending on the market, because of local market forces. But then the second piece was, okay, now, how do we reconcile that you’re no longer working in the Bay Area. You’ve moved away from the Bay Area, and we have a differential for working in the bay area because it’s cost of labor. It’s high there, but you’re working now in Idaho, so we’re going to adjust your pay. You saw some employers come out pretty loudly around that. We used to get asked that a lot as people were reconciling that. And I think my advice was always, it’s never great taking pay away from people. It’s always something that always, you always kind of want that to be your last resort. That’s not a wonderful message. So one of the things we, you know, we typically advise is, why don’t you look analyze it, look at the scale. Look at how many employees you have in certain locations and model the changes that you would make and maybe, maybe taking pay away isn’t the right thing. Maybe it is the right thing, but maybe it’s not the right thing, but I do think it’s led to, again, more transparency around this is how we design a pay program. Your job is valued differently depending on where it is, because of cost of labor, maybe cost of living does influence that as well. Scarcity of talent, you know, my my data scientists, get a premium right now because there aren’t as many of them, and we need them, you know, those types of things, those types of choices. But I think being, you know, having a conversation with employees, just explaining to them that rationale, employees respond, well, they like that there is this purpose and this rationale associated with how they’re paid, because their pay is really important to them. So they want to know that there’s a plan behind it. Absolutely,

Lauren Jenkins  13:37

I think that’s one of the big things with transparency is just creating that dialog thinking about other impacts here on compensation and benefits and overall total comp What do you see trends wise as it relates to this pay transparency?

Nancy Romanyshyn  13:56

One of the things we’re seeing is, yeah, transparency is definitely changing the design of pay programs. So we are seeing things like sort of a, I want to say, a normalization in a way of base pay for sure, where you’re going to see less variation, less swings in the data around base salaries as more and more people are sharing what they make. And, you know, again, there may be differentials based on location, but it’s but in other words, things that are observable, things that are objective, not you know, Nancy negotiated for that really high salary, you know, so you’re seeing, I think you’re continuing to see some of that, at least, employers moving toward that, employers around base salary. Employers are also tightening those ranges because they know they have to post them. So you’re seeing employers move to functional ranges. So maybe all of finance, rather than having finance marketing, HR, everybody in the same band, you know, this global band, we’re going to say, No, this is Finance. Yes. So within that, I have financial analysis, I have accounting, you know, I I have, you know, tax. I have some of these different job families and they and they may vary, but at least I have this one consistent range and I can and a structure that I can better communicate with my employees. We’ve seen some companies go to job based ranges, which is fascinating to me, and I think, difficult to manage, but some companies are choosing to do that. They’re like, forget it. We’re just going to go to that. So I’m seeing that change around transparency. The other interesting thing I’m seeing is, especially among, say, some of your large tech companies, there’s a lot available in terms of information on the internet around how equity is structured, vesting schedules, like different it’s really fascinating how a lot of that is being shared. So I think that too goes to really recognizing that, you know, employers may be coming in with this design, but now it’s you’re seeing the public kind of weigh in, and the people that you’re attracting and incentivizing are weighing in on it. And I think there’s sort of this feedback loop that’s developing around, is that fair? Is it effective, you know? So I think that’s going to shape some of what’s done around how that’s structured. So I think things are just becoming less nuanced at an individual level. There may be, I think we are seeing an increasing nuance, though, at more of a group level, function segment of industry, those types of things. It’s just that we have to be able to explain? Well, yeah, we teach, you know, we treat these folks differently for these reasons, these objective reasons. So it’s more like that versus, say Nancy negotiating for a better deal. So

Chris Dohrmann  16:53

just let me sum up so companies that have a philosophy and are also multi state employers or multi country employers, and knowing that in the US, they’re not likely to get an overarching federal, codified regulation here, what are they doing? Are they forming at least common denominator strategy?

Nancy Romanyshyn  17:13

They are developing a strategy. First of all, it’s elevating, it’s coming out of, say, compensation administration sort of level, and it’s you’re seeing that total rewards. Leaders are really elevating it to say, hey, leadership, we need to let you know this is a strategic imperative, our approach to transparency. And then they’re putting together, say, different work streams to determine exactly, let’s assess what’s required. What do we do now? What’s, you know, let’s do the gap analysis. What do we need to do? Where are all the data? Do we have one system? Do we have several systems? You know? How are we going to do that? So they’re doing sort of this assessment, and then they’re moving toward, you know, again, depending on how centralized or decentralized they are, that really kind of dictates the speed we’re seeing kind of a centralization right of how we need to address this, and we’re seeing transparency strategies play out, I want to say at the country level, at the very least, where folks are making a decision that, okay, yep, we have significant operations in, for instance, New York and California. And now, you know, we’re seeing other states follow suit. So we’re not going to do different things in different states. We’re going to have one us view with the EU pay transparency directive, you’re seeing sort of a similar motion where, and that’s what that’s done, is that’s laid out sort of a least common denominator the EU pay transparency directive is the floor. It is saying you need to do these five things, and then each of the member states can transpose the law, and you can, they can toss in their own little flavor of what they want to do. So that’s what Sweden did. Sweden said, we make you do all these things already, and we’re going to do the EU pay transparency directive. So you’re going to have to do all of it. So I think for a lot of employers, what they’re what they’re in the midst of deciding is, do we do anything beyond country by country? Do we do an even sort of broader strategy? And I think that’s still in play, but what I’m hearing is we, we typically have a global perspective. We are going to be globally transparent. But then there’s an element of, we’re going to sequence that country by country. We may decide not to, depending on whatever’s going on in that particular country. It may look different country by country, kind of a thing. So that that right now, that’s really what’s playing out, but, yeah, having, but at least having a strategy across the enterprise for sure, and

Chris Dohrmann  19:46

just to be completely, you know, transparent, that’s what prompted my original interest in this whole discussion. Because equity compensation is part of the EU directive, but not yet part of the. Us. You know, approach to this maybe coming soon in jurisdictions like New York City or Colorado or even Hawaii, but not here yet.

Nancy Romanyshyn  20:09

That is exactly right. Companies are realizing just because this is what’s the bare minimum that’s being articulated, there’s eyes on all forms of discretionary compensation and beyond, because in the EU pay transparency directive, they talk about benefits, they talk about allowances, they talk about a myriad of different things. So when I’ve spoken with some global employers, for instance, that have grown by acquisition, it starts to get a little problematic, because they may have made different deals with different companies that they acquired, and they may still be in a transition stage. So yes, three years ago, we acquired this business entity, and, oh, that’s going to be transparent now that those employees get this and these employees get this even though we’re all one company. So I think preparing for that eventuality, that there’s going to be some level of disclosure that you’re going to have to make on all forms of compensation. So what you know, do you want others telling your story, or do you want to tell your story? I think the other thing that’s that’s a challenge, but an opportunity is for some of these global employers We’ve been speaking with, they kind of go, Oh my gosh. You know, pay is defined as this for the purposes of the EU pay transparency director, but then we say, Pay is this, and then over here they’re talking about this, you know, what’s the right answer? And I think that’s where employers have a great opportunity to lean in and say, well, let’s just, let’s lay it out. Let’s say at our company, this is how we define pay. We’ve always talked about pay with you. This is your total rewards. This is how we think about it, in the context of your employee value proposition. This is what you know, our mission, our goals and how, how we value you. What you’re going to see Nancy is you’re sitting in France. France legislation requires the disclosure of data, and that’s how it’s going to be defined for the purposes of complying with, you know, the local legislation. But understand this is how it relates to how we think about it at our company. So I think it’s just making those distinctions, but but being more and more intentional, and making sure that you have a strategy for how you’re setting that up, how you’re scaling that education and those conversations internally with your employees, I think that’s where, that’s what we’re starting again. It’s all sort of in motion. It’s all happening right now.

Chris Dohrmann  22:40

So I think that brings us to my favorite part of the podcast, which is a rapid fire round. And this isn’t a press conference where we’re going to try and ask the question that you’re not ready for. This is part of the podcast that highlights your expertise in the most efficient manner. All

Lauren Jenkins  22:56

right. First question is, what’s the number one thing a company can do to prepare for? Pay transparency. It’s

Nancy Romanyshyn  23:02

a really good question. The number one, the first thing, I think I wish understand what you have. And by that, I mean I would say, Maybe another way to say it would be, don’t underestimate what pay Transparency means, and really think about it in a strategic way. So that means first understanding what what you do, what you have, what it means, how you’re defining it, how the world is defining it, really spend some time assessing and being planful and intentional around then what you’re going to do. Don’t just dive in. So I guess maybe it’s more of a Don’t, don’t just dive in. Don’t be reactive. Try to be proactive and strategic around it, and that’s going to serve you well.

Chris Dohrmann  23:52

You’ve addressed most of this already, but for listeners in the comp and benefits space, what three things can they bear in mind when they’re first addressing pay transparency,

Nancy Romanyshyn  24:01

putting, I think number one would be putting the employee at the center, making sure you’re always thinking from the employee mindset. I think that will really help orient you toward how you’re going to share information, making sure you’re setting just the right tone, and again, having that intentionality around how you’re communicating, all that you’re going to be communicating and educating, and how you’re going to invest in that education of your employees. Then the second thing I think, I’d go back to, you know, sort of that assessment, right? It’s, I think, assessing and pulling together the different stakeholders you’re going to have, looking beyond your your own immediate team, and recognizing that you’re going to have to bring leaders along. Leaders are going to be reluctant, or anticipate that they may be reluctant. This is a big change, so I think assessing and pulling together, say, a multi disciplinary team, to help you then you. Really get a handle on what is the scope and breadth of of what we’re going to have to do to meet all of this. And then I think giving, giving yourselves grace, I think would say, I’d say, that’s the third thing, knowing that this is a moving target. It’s evolving as we speak. And I think the more you’re thinking strategic about it, the more you’re thinking about it from the employee point of view, the better you’ll you’ll be able to then pivot as new things emerge and have sort of these, it’s, I’m going to sound very consultant speak, but having these guiding principles right in your brain that you’ll continue to go back to so that when this new law pops up, it’ll be like, Okay, let’s think about it within this context, this law is going to impact. Let’s see these stakeholder groups. Let’s immediately, let’s have a plan for checking in with them and then figuring out how we’re going to move forward. So I think it’s, it’s really around having, being planful and intentional, not reactionary. It’s very difficult, because you’re you’re changing things as you go. But I think that the good news is, you know, total rewards. Teams have a lot of these things in place. It’s just maybe framing them a little differently, thinking about them a little differently, and then being ready to share them. I would say, don’t be scared. We’re all scared. So I can’t really say, I know it’s not helpful to say, don’t be scared. But I would say, you know, what do they say? You know, courage is being scared and doing it anyway, kind of having that bravery. I think, as total rewards professionals, we’re always so worried. We perseverate on do we get the calculation right? Do we have the right amount of data? Do you know, analysis paralysis? This is not a time for that. The best thing you can do is just be vulnerable and say, so we’ve refined our ranges. They’re narrower than you’re used to. This is why we’re doing this. We’re being transparent. Yes, people are in different places in the range. I can answer most questions. I can’t answer all the questions, but I’m going to do my best to answer them for you. And let’s keep the dialog going. And these ranges may change too as we get more information, that’s what we’re doing. This is a I like to sometimes talk about it as like, almost like six sigma, like you’re we’re moving from a set it and forget it, kind of total rewards mentality when it comes to structures, to more of an ongoing, continuous improvement motion as we get more data, as we use different as new and different market data emerge, right? We have so many different sources. As we do better analytics internally, we’re going to continue to refine and hone what we’re doing, because we this is really important. So we do these analytics all of the time. I think leading into process versus the product is what’s really something that’s been successful at a lot of with a lot of the companies that we work with, where they talk more about the process, less about, say, the number or the range. It’s really how the process of how we got there, employees really appreciate that, because, again, it shows, yeah, we we take a lot of time and and we put a lot of thought into how we value what you do. So,

Chris Dohrmann  28:02

Nancy, you just mentioned data, and this happens to be at a time when AI and data cataloging and everything else is really at the forefront. Are your clients using the vast amounts of data to form the data ranges that they need?

Nancy Romanyshyn  28:18

I think what we find with our clients is, yes, in the sense that they’re what they’re doing is they are really leading in terms of using new and different sources of data. So we find, for a lot of our clients, I think it kind of in a binary kind of fashion. Sometimes there’s your external data and there’s your internal data. So your external data is, you know, when we think about market data, and we know that there’s been a huge and very rapid evolution around how we’re defining market we’re seeing a lot of our customers use the conventional, sort of typical surveys and information, but then also use things like, you know, applicant tracking, ATS data and offers data and what’s available sort of these different variations of I’m going to put in air quotations real time, because a lot of times they’re not real real time, but so they’re definitely looking into all of these different things and referencing them. I’m hearing more and more about that, but then the other part of it is the internal data, and I’m seeing certainly a lot of our customers, that’s exactly what they’re doing. Is they’re getting better around analyzing how they’re actually delivering pay in real time, and what can that tell them about what they should do next and how it informs pay decisions go forward.

Lauren Jenkins  29:37

So last question here, Nancy, can you sum up your philosophy on pay transparency in one sentence.

Nancy Romanyshyn  29:44

Let’s see my philosophy on pay transparency in just one sentence is just do it. Just do it. I do a workshop where I ask employers in the workshop. So what if tomorrow you woke up and everything was completely transparent, everything, everybody had access to all the information about all the employees, every bit, every bit of it. Hey, performance, ratings, job, everything, what are the first three things you do? It’s a great exercise. It’s a great mental exercise. You can get past the visceral like heart beating reaction to help you prioritize what you need to do to get ready. So and usually it’s one of three things. It’s I don’t know what. I don’t know things are broken. I need to do some assessment and analysis to really understand what’s broken, because I’m not sure what, but I know I have some ideas. Or it’s I know what’s broken. I need a chance to fix it before we you know, we go forward, or I feel okay about that. I’m actually pretty happy with what we’ve done, but I I want to lean into explaining it. I don’t know that we’ve explained enough of it, so we really need to focus on communication. It just really helps take this overwhelming concept and and bring it back to what is practical. There you there is no benefit to waiting. There is every benefit to do something, take one little step, do something, assess, do whatever it is, but just do it, because you’re just going to feel a lot better in the end. There’s much more upside to this than downside, and it truly can be exciting once you get past you know the fear and trepidation it can it’s a really exciting time to be a total rewards profession.

Chris Dohrmann  31:37

People need to remember what it was like to be a kid. Ripping the band aid off is always easier than just agonizing through it. Nancy, it’s been a real pleasure. Thank you very much for joining us on the podcast. Well,

Nancy Romanyshyn  31:50

Thank you so much for having me. It’s been so wonderful talking with you and I, I enjoyed this and all of our conversations at the next conferences that we bump into each other at.

Lauren Jenkins  32:00

Thanks so much, Nancy. And that brings us to the end of this episode of Prosperity at Work from JP Morgan Workplace Solutions.

Chris Dohrmann  32:06

Thanks for listening. If you’ve enjoyed this episode, we hope you’ll review rate and subscribe to JP Morgan Workplace Solutions Prosperity at Work, available wherever you get your podcasts.

Lauren Jenkins  32:18

You can find more insights on equity compensation, financial wellness and more by following us on LinkedIn or over at globalshares.com where you can also download our new global equity compensation report 2024.

Chris Dohrmann  32:30

Until next time, that’s Prosperity at Work. Bye!

Information provided in this podcast is intended for informational and educational purposes only. It may contain views which differ from the views of JP Morgan Chase and Company. For specific guidance on how this information should be applied to your situation, you should consult a qualified professional for full details. See the show notes on your podcast player right now.

Lauren Jenkins  32:54

The Prosperity at Work podcast is produced by dustpod.io for JPMorgan Workplace Solutions.

0:00:05.2 Chris Dohrmann: Welcome to Prosperity at Work, the newly branded podcast from JP Morgan Workplace Solutions. You may have tuned in previously when we were known as Own Up, the podcast by Global Shares. So welcome to a new and improved show. As you may know, Global Shares was acquired by JP Morgan some time back, and has now completed this transition to a new brand. On this podcast, you’ll learn about equity compensation, financial well-being and more with expert insights and stories from people who’ve already done the hard work and have lessons to share. And so here we are, new name, new look and feel, and a new co-host here beside me, Lauren Jenkins, our head of Executive Participant Services. Lauren, welcome to the show.

0:00:46.5 Lauren Jenkins: Thank you, Chris. I’m really excited to be here, especially as we unveil our new podcast name and a few new features of the show. So what are we talking about today? Let’s get into it.

0:00:57.5 Chris Dohrmann: Financial reporting. It’s an essential of equity compensation plan administration, but for one of a better word, it can be painful.

0:01:14.0 Lauren Jenkins: There’s no getting around it. How do we get through the sea of complexity, that is, reporting. Today’s guest navigates one of the most complex reporting environments you can imagine. Listeners in the US or North America, may not know Coupang, but it’s the Amazon or eBay of Korea, as well as one of the top three IPOs of 2021, that’s a pretty big deal. We’re joined by Lilyanne Nuevaespana, the Director of Global Accounting, and it’s our pleasure to introduce her now. Lilyanne, welcome to the show.

0:01:41.3 Lilyanne Nuevaespana: Hi, thank you for having me.

0:01:43.1 Chris Dohrmann: Could you tell us a little bit more about Coupang for the listeners that may not be very familiar.

0:01:49.4 Lilyanne Nuevaespana: Oh, yes. Coupang is like, as you said, the Amazon of South Korea. It’s actually now the biggest e-commerce retail company in Korea. And they are well known for what you call the rocket delivery, which, you order from them by midnight and it will be in your door by 7:00 AM. And this is mostly for, especially for groceries and fresh produce and the like… So as you said, they did the IPO in March of 2021, ’cause it’s a US company, it’s listed in the New York Stock Exchange, and that’s why we do all the US Cap reporting and the SEC filings of the 10Qs and the 10-Ks.

0:02:35.9 Chris Dohrmann: You also have a couple of other complexities, so if not for the size of the company and for the multi-national aspect of the company, listing on a US exchange and having a headquarters in Seattle, but having operations primarily in Korea, you also do dual standard, Accounting Standards IFRS 2, as well as US Cap.

0:02:55.1 Lilyanne Nuevaespana: Yes, exactly. So we still have to file all the standalone financials of each country where we operate. So Korea is the biggest one, but we do have operations in Japan, China, Hong Kong. And with the acquisitions of Farfetch, we also have operations in Europe now, which is the UK, Portugal, and Italy are the biggest ones.

0:03:21.4 Chris Dohrmann: So you’re going over there as if it’s routine, there are a number of other things that you do that make the complexity even more so. So, you allocate expensing down to whether it’s the country level, but actually down to the corporate budget level, so you have budget expenses that you keep in the system and allocate expense that way.

0:03:46.6 Lilyanne Nuevaespana: Yes, so each employee is assigned a cost center and an entity, and we do that in Global Shares, it’s in our HR tool, which is called Workday, and our HR to a Workday is interfaced with Global Shares. So those data, the cost center and the entity, we can allocate the expense of that particular employee using those two fields in our reporting and on the system. So it makes it easy for us to allocate expenses to each entity and each cost center.

0:04:27.2 Lauren Jenkins: Regarding the garden leave process and sabbatical tracking in Workday. Can you talk a little bit about how that works for Coupang?

0:04:38.4 Lilyanne Nuevaespana: So every month, we have a summary of anybody who has applied for a leave of absence. So any leave of absence that is more than 90 days, means that your vesting of your shares will also be pushed back 90 days. So we do have a process where we send this to Global Shares, and they will be the one to update all this in the system. We have the Jira ticketing system, for all our requests, so I guess we have set up this system where none of Coupang employees can change anything in Global Shares. Anything that we need to change, we need to send to Global Shares using the Jira ticketing system.

0:05:26.7 Lilyanne Nuevaespana: And they will be the one to change the vesting dates and anything that needs to be changed, then they give us the report back and we have to double check, make sure everything is accurate before they actually put it live in the system. So this is done every week actually, or every day, if we need to change anything, we send it to them, and usually it is done overnight and we get it there. Garden leave is different. Garden leave more of a… If somebody… This is usually for executives, when they terminate and we still give them like, okay, this is your termination date, for example, today, but you see your will still vest one year from now. So that one is totally different for accounting purposes and in the system also, it’s a different kind of change to just a regular leave of absence.

0:06:26.7 Chris Dohrmann: We’re talking about reporting, as if it was something that basically came right out of the box for you, but as a private company that was founded in 2010, and then IPOed in 2021, you had a lot of conversion to do, an orientation for many of your stakeholders about new reporting, because you probably had an abbreviated reporting period right after the IPO to do your first financials, whether it be a Q or a K. How is that process for you? And how did that work?

0:07:00.7 Lilyanne Nuevaespana: Yes, once you do an IPO, there is a lot of compliance and regulations that you need to follow, one of which is reconciliation and the other is segregation of duties. So those two are the main controls that we need to put in place when once you become public, because of the SOX audit and SOX controls, I don’t know if you guys are familiar with SOX controls, but this is like the requirement of the SEC, the Securities and Exchange Commission, under the PCAOB. This was actually formed in way back in 2001 when that [0:07:41.5] ____ happened, a long time ago. So anyway, so before we became IPO, those were the two issues that most private companies have is, segregation of duties. So one person can do a lot of things, and when one person can do a lot of things, fraud can happen.

0:08:03.3 Lilyanne Nuevaespana: So when we did the IPO, we had to separate the operations or the admin side of RSUs and the accounting side of RSUs. Before the IPO there was only one person in charge of everything, the admin and the accounting, and so there was a lot of errors. So when IPO happened, before IPO we moved to Global Shares, but that was… Aside from the segregation of duties and reconciliations, it’s also because of we are in so many countries. We needed someone who can cater to sending money to all these different countries or administering our issues to all these different countries. So there is the accounting side controls, and there is also the operation side where we actually had to move to Global Shares to be able to address all those needs.

0:08:57.9 Chris Dohrmann: The global aspects. And just for our listeners, the SOX refers to Sarbanes-Oxley, the controls that were put in place by that legislation.

0:09:07.5 Lauren Jenkins: So one of the complexities that you’re dealing with at your company is that you’re doing a roll forward for every reporting period. Can you talk to us a little bit about that?

0:09:16.5 Lilyanne Nuevaespana: Yes, so one of the biggest footnotes disclosures needed for the filing of SEC is the roll forward of the shares. It is presented in our statement of equity, and it is also presented in our footnotes. So the way we do it is you need to have your beginning balance, right? Whatever is outstanding. So there are two kinds of RSUs, what is outstanding that’s already in the white CAP, that means it was already issued, right? And then there is also the outstanding, but not yet… It’s outstanding grants is what we call it. So it was already granted to the employees, but they haven’t vested yet, or they haven’t took… Employees have it exercised. So there’s two things that we are monitoring. So the one that is outstanding and in the market, it’s basically, okay, you’re beginning balance, and then what was released and then what was…

0:10:21.2 Lilyanne Nuevaespana: Exercise is actually release an exercise, it would be your outstanding balance out in the market. And then for the ones that are outstanding, granted that would be your beginning balance of what was like outstanding in the previous reporting period, and then you add all the grants, all the RSUs that was granted during the period that we’re talking about. And then forfeiture, you remove all the forfeiture, and then you remove all the ones that were released and exercised. So we used Global Shares reporting for all of these. So we go get all the release report, the exercise report forfeiture reports. So having all these reports and also the [0:11:08.3] ____ Grad Malan report reconciling all this, then we can get those discourses that we need for our filing.

0:11:17.1 Chris Dohrmann: So it sounds like just the regulatory piece of this is only a small part, you use the reporting to also manage dilution, calculate burn rate, make sure that the General Council and compensation committee are updated, so it sounds like all of these people are literally interested in everything that comes out of your department.

0:11:38.3 Lilyanne Nuevaespana: Yes, there’s a lot of stakeholders. We have FP&A that ask for a lot of these reports for budgeting and forecasting purposes, we have global compensation that gets this so that they will know for each employee how much is outstanding, how much is for… This is for planning on the compensation basis for each employee, because ours issue is a big part of the compensation.

0:12:07.7 Chris Dohrmann: Right, and you mentioned executives before, so I mean the executives, even when you were talking about garden leave, they may be the minority of the population, but they hold usually the majority of the shares. So it has a big impact. So a small amount of people have a large impact.

0:12:23.6 Lilyanne Nuevaespana: Exactly, so we really watch those executives when there are movements on those executives who watched them, ’cause they’re very significant in the total.

0:12:32.8 Chris Dohrmann: We’re gonna move to a section now that really highlight your expertise, and we’re gonna call it quick fire. We’re gonna make you talk less because you’ve been very gracious and explaining much of what Coupang does, but we’re gonna ask you some very specific questions. Is that okay?

0:12:47.6 Lilyanne Nuevaespana: Sure.

0:12:48.4 Chris Dohrmann: Great.

0:12:48.5 Lilyanne Nuevaespana: If I have the answers. [chuckle]

0:12:49.8 Chris Dohrmann: Great, I think you will. So, I’ll start. What three things were essential to be able to do your job properly when converting the data on to the system?

0:13:03.6 Lilyanne Nuevaespana: Well, first is accuracy, right? So we do a lot of validations when we did transfer our data. The second one is the timeliness of the reports and timeliness of processing data. Because there is a very specific dates where once, for example, when grants are given, we make sure it’s in the system, and then we have to release letters to all these employees to give them the grants, because those are required, the communication to the employees, so timeliness is also important. And then the third one is, when we have issues, we want somebody who can address them in a timely manner, so that was also one of the requirements that we had that was really important to us, especially during the early stage of implementation in Global Shares.

0:14:02.1 Lauren Jenkins: And what would you say is the sign that things are working well from a financial reporting perspective?

0:14:09.0 Lilyanne Nuevaespana: So we do a lot of recalculating and double checks, so when everything works well in the roll forward reconciliation and we can generate it on a timely basis, then we know that it works very well. When there are unreconciled items that we cannot figure out, which sometimes happen because of the timing, as long as it’s not material, so sometimes we have like 7,000 of shares that we cannot figure out, but 7,000 compared to 20 million of shares is nothing. So we can pass on those and we can just reconcile them the next month. So those things as long as they reconcile and then they roll forward properly, it helps a lot and we are sure the financial reporting is working well.

0:15:05.2 Chris Dohrmann: So it seems like your stakeholders like payroll and Workday, it’s really impact your job and it’s easy to manage the roll forward if you’re gonna use them as an out of period next time using the ticketing system, so great.

0:15:21.4 Lilyanne Nuevaespana: Yes, yes. Definitely.

0:15:23.9 Chris Dohrmann: I’m glad that’s working. Maybe one final quick question is what role do communications with your stakeholders, ’cause you’ve mentioned them a couple of times, play?

0:15:32.4 Lilyanne Nuevaespana: Oh, that’s very important. We have regular communications, they let us know what they need ahead of time, and I guess it’s all… You know how Accounting works, right? We want check list. Everything is a checklisted. What you need, when you need it, when is the deadline? So most of those are already in our checklist, so we know when they need it, but sometimes they do ask for something, and that’s where Global Shares really helps a lot because we can generate reports anytime we want in Global Shares. So they do sometimes ask for things that’s not in the checklist, but we are always ready for it just because we are using this Global Shares, that’s always… Usually it’s all realtime.

0:16:18.3 Chris Dohrmann: Great, I just wanted to thank you for your time, but was there anything that you wanted to talk about before we stop asking you questions? And again, thank you so much for being so gracious with your time, Lilyanne.

0:16:32.9 Lilyanne Nuevaespana: I really wanna thank the accounting team, your financial reporting team for helping us a lot. It was a lot of work, especially the first few months that we were working with Global Shares, but they were very gracious, they always communicate well and they’re very timely in their communication and they have solved a lot of our problems, a lot of our issues, especially with financial reporting, so thank you so much for from Global Shares.

0:17:00.4 Chris Dohrmann: And I wanted to emphasize the fact that there… You’re being very kind again, and the fact at best they’re six hours away, and at worst, they’re sometimes 13 hours away. So the ticketing system and the communication is critical. Thank you again, Lilyanne, from Coupang, Director of Accounting. Thank you so much.

0:17:19.9 Lilyanne Nuevaespana: Thank you again.

[music]

0:17:26.6 Chris Dohrmann: Now, to help us get some even deeper insight on financial reporting, let’s welcome, Mayura Arankalle, our Global Head of Financial Reporting at JP Morgan Workplace Solutions.

0:17:35.6 Mayura Arankalle: Hi, Chris, great to be here.

0:17:38.7 Chris Dohrmann: It’s great to have you. I wanted to just mention quickly, before I forget, Lilyanne was talking about expensing and the fact that they use cost centers. And I wanted to bring up the point that most times the expensing follows the recipient and follows the employee. So I wanted to see how you can explain that to our audience because it’s a little bit of a concept that’s very important, depending on the size of the benefit, but it’s something that people have to make sure that the data gets into the system to reflect that.

0:18:11.4 Mayura Arankalle: No, absolutely. So Chris, the fact is that the accounting standard requires companies to book the cost in the employing subsidiary. That’s the requirement of the accounting standard. But in addition to that, a lot of companies, especially the size of Coupang and the likes, they need to record expense for their management reports, which could be for the purpose of forecasting, budgeting or just a cost location. So it becomes quite important for such companies to track the participants and how they move from one cost center to the other so that they’re booking the expense in the right cost center. So when they’re creating P&Ls for their subsidiaries or at a cost center level for any decision making, it is quite important that the cost is booked in the right cost center and tracking of this for multinational companies can be quite a lot of challenge.

0:19:00.2 Mayura Arankalle: So in order to help that kind of having some sort of an automated system where you could potentially have the data coming through from HR into your financial reporting system could help all financial reporting teams really to streamline this activity and get the right costing at the right demographic data. It is not just the cost center and the movement as well. One of the factors that plays a significant role is that some jurisdictions, for example, does not allow participant to get cash. It does not allow participant to get stock and they need like cash settlement, for example, China. And if a participant moves from a jurisdiction, say like US to China, their award type changes. Now again, this is part of… This is very common for big companies where there are people in all across the world, how do you account for this? Because the accounting treatment as such changes as well. So it’s just not about booking in the right call center, it’s also making the fact that you’re booking the right accounting methodology and that makes it quite difficult for the likes of Coupang to manage.

0:20:05.6 Chris Dohrmann: Yes, you raise an excellent point. The fact that she mentioned it a couple of times as well, accuracy. And the accuracy really is reflected by the quality of the data in, and the timeliness of the data date in. So as long as we’ve given them the wherewithal to make sure the system is updated, it sounds like the expensing can follow suit rather seamlessly.

0:20:26.1 Mayura Arankalle: Yeah.

0:20:26.7 Chris Dohrmann: I did also wanna raise one other issue, that we kept referring, to the fact that leave of absence is something that is available at Coupang, whether or not it’s garden leave upon termination, or whether or not it’s leave of absence. How does that pose an issue for you and how do you address that?

0:20:44.6 Mayura Arankalle: So the view that Coupang has taken, that if there is a garden leave, what it effectively means that the service period gets extended from the original vesting schedule. The view that Coupang has taken is that from an accounting point of view, they will just extend the expensing over the extended period. Now this is a view that is taken by Coupang in terms of their circumstances. However, this could result in a modification accounting because effectively extending the service period could result in modification accounting as well, which creates a lot more complications. So again, it is one of the things that for Coupang we would tracking of the fact that someone has gotten in the garden leave when now his original vesting schedule is no longer the service period, it needs to be extended. We need to make those updates. Again, goes back to… And it can be material because you could have a lot of people with high number of awards whose expense could effectively be extended significantly per a year at least. That makes a big difference on their P&L reporting. Again, just the fact that you can do this on an automated system makes it far simpler and the accuracy level really goes, this is is good in that sense.

0:22:00.6 Lauren Jenkins: So Mayura, communication is obviously a critical piece to success in financial reporting, can you talk to us a little bit about how both internal and external communication come into play here?

0:22:11.0 Mayura Arankalle: Absolutely. Now, in terms of financial reporting, generally these teams are, they have real tight deadlines to book their expense to publish their reports. So they have to close their books. Now, in order to do that, they need to have the data in regarding their share plans in terms of any new awards granted, any participants moving the fair valuations to be done for these awards, any forfeitures terminations, because all of this has a direct impact on the expense calculations, or it could be the deferred tax calculations or it could be the earnings per share calculations. Now that makes it very essential to have a clear communications between the HR and the data flowing through HR through the finance teams. Now that could be… Every company will have their different way of doing it, but in terms of Coupang, it just making sure the right termination means are applied.

0:23:03.0 Mayura Arankalle: So if there are any shares getting profited before the end of the reporting period, that needs to be reported accurately. If some shares are gonna get accelerated on termination, that has a different accounting treatment. So that needs to be reported accurately. If participants are moving from one jurisdiction to the other, that demographic update needs to happen before the close of reporting period. So it’s just making sure that the HR has updated all of these before you close your books, so that when you put your experience and you do your calculations, you have the accurate reports and you don’t have to kind of reverse out any entries in then in the following period just to get an accurate picture. So it’s just important to have… Use technology where possible it could be using a service provider or just having systems in place, but all of this information is recorded timely.

0:23:50.1 Mayura Arankalle: Now, one of the things with Coupang we’ve seen is we have this process documents in place where we followed timelines with them that help them get to their, deadlines, but even given to the fact that we have a bit of time difference in terms of… So they’re based in Korea, we are based in Europe, we try to manage this by using Jira ticketing system where we were able to communicate to them, and not just between my team like, JP Morgan Workplace versus Coupang, it’s also within Coupang’s HR team and our EPM teams as well. So just having this Jira’s ticketing system, which is like a common system, like everybody can see the tickets coming in and being processed, that helps in making sure that we are able to meet the tight deadlines accurately. The data updates have made accurately at the right time. So there is no need to kind of undo stuff, redo stuff, and waste time. So it has helped in the sense of just having clear communications between HR, finance and then if you have an external provider using some sort of technology like Jira ticketing system that helps communicate things faster, get things done faster, and there’s a good audit trail as well just to make sure where the source came, how we made the processes, and what that resulted in.

0:25:00.4 Lauren Jenkins: Absolutely. All critical to a successful process.

0:25:04.3 Chris Dohrmann: Mayura, thanks for joining us. That was really great, and it really puts a tech or an expert spin on the conversation we had with Lilyanne. Thank you very much.

0:25:15.0 Mayura Arankalle: Thank you so much for having me.

0:25:21.3 Lauren Jenkins: And that about does it for this episode of Prosperity at Work by JP Morgan Workplace Solutions. You can find more insights on equity compensation, financial wellness and more by following JP Morgan Workplace Solutions on LinkedIn or checking us out over at globalshares.com.

0:25:35.5 Chris Dohrmann: And as always, remember to follow or subscribe at your podcast provider of choice, and until next time, that’s a Prosperity at Work. Bye.

0:25:45.4 Lauren Jenkins: Bye.

0:25:45.4 Lauren Jenkins: Information provided in this podcast is intended for informational and educational purposes only. It may contain views which differ from the views of JPMorgan Chase and company. For specific guidance on how this information should be applied to your situation, you should consult a qualified professional. For full details see the show notes on your podcast player right now.

0:26:05.2 Chris Dohrmann: The Prosperity at Work podcast is produced by dustpot.io for JP Morgan Workplace Solutions.

00:00

This is Own Up, the Global Shares podcast about employee ownership and equity compensation. Answering questions and sharing with industry experts, here are your hosts, Chris Dohrmann and John Bagdonas.

Chris Dohrmann 00:24

Welcome back to Own Up.

In today’s episode, we’re tackling one of the most important financial skills you need to learn…and that is how to ensure your own financial wellness.

We have spoken previously about the challenges presented by grant or award recipients not understanding their benefits. In the same vein, companies commonly encounter difficulties when offering an all employee ESPP, as almost inevitably a large percentage of those eligible will have little to no experience with stock or the market in general. So, when an organization such as Stanford sets up a program to offer Financial Education to students, it should be recognized. You cannot appreciate the value of what is offered unless there is a strong foundation in place.

Our guest today is the manager of the Mind Over Money Financial Wellness Program at Stanford University. Known on campus as ‘The Financial Wellness Guy,’ Danial Khan you’re very welcome to the podcast!

Danial Khan 01:22

Yeah, I’m very happy to be here. Thank you so much.

John Bagdonas 01:24

Danial, why don’t you tell us a little bit about yourself, and your very interesting journey to Stanford and why you’re so passionate about this topic?

Danial Khan 01:32

Yeah, I’m Danial Khan. I’m from Buffalo, New York. And I’m kind of known as the financial wellness guy, on and off campus! We have a program. And I don’t know, maybe financial wellness is not a familiar term. But essentially, we try to align financial wellbeing with life aspirations.

A lot of that is blending personal finance with health promotion. And so trying to make financial education and wellbeing promotion more accessible to people, trying to cut through some of the jargon. We’ll get more into that I’m sure throughout this conversation, but my backgrounds in social work, business administration, and psychology. So I found this work to really well blend those worlds together. I also have background in non-profit consulting, and helping social workers promote their own financial wellbeing and to talk to their clients about personal finance in a more healthy way. And yeah, I’m just happy to be here.

Chris Dohrmann 02:31

Thanks Danial! I wanted to just say that John and I deal with, you know, executives and other employees of companies, and Palo Alto sits right in the middle of Silicon Valley, where equity compensation is a big part of their compensation package. And we tend to think about, you know, on one end of the spectrum, where people are getting more complex awards, and we’re eliminating 65% of the spectrum, where people are coming in, they’re either new to the workforce, they may be new to equity compensation. And what we’re disregarding and what we really should pay much more attention to is where you fill the gap. They need to have a basis in their educational wellness, I mean, their financial wellness, so they need to understand budgets, they need to understand a little bit about taxes. And I think that’s what you bring!

Tell me a little bit more about the fact that, I think this is an introductory offering, but you get people, you know, from all over the world that are taking courses at Stanford, and they come to you to try and get a sound basis in this, correct?

Danial Khan 03:40

Correct, yeah. And to be honest, I came into Stanford with some biases about the population of students I’d be working with. In our program, we serve students and alumni. So a lot of the people we talked to are starting the career after graduating, and they are trying to have those introductory conversations. But my assumption was that, well they’re at Stanford, what do they need help with personal finance about but that was, I was incorrect in that, you know. People are coming from a lot of different socio-economic backgrounds, different experiences with their family that weren’t financial experts. And a lot of times, they’re kind of starting from more or less Ground Zero, for how they want to learn about where personal finance plays a role in their life. So most of the conversations are just getting started. How do you manage your money, develop some awareness and intentionality around your spending, your saving? How do you actually start investing, and what does it mean to you? Setting financial goals, and a lot of those aspects of starting your career and navigating the benefits and getting paid for the first time on salary, getting bonuses and stock options, all that stuff really comes up, and more, it gets more complex sometimes, but a lot of times, it’s just starting off with the basics.

John Bagdonas 04:55

You know, I was going to say also from our previous conversations, that, as you say, so many of the students at Stanford, and obviously the alumni, come from so many diverse backgrounds, both economically and culturally as well and that here in the US, we tend to look at financial wellness more as, Chris and I are obviously trying to drive it as a necessity, something that you really had to be focused on, but I’m sure that there are people that come from other parts of the world where it truly is a luxury.

That the necessities in some of the places that they come from are truly you know, very basic and that financial wellness is really deemed as a luxury. It’s almost I can think back to my earlier sort of academic, early business days when you learned about like the Maslow’s Hierarchy of Needs like from a psychologist standpoint that is really very similar from a financial wellness standpoint, that there really is a hierarchy as well.

Obviously there are the short term financial needs, budgeting and things getting by, just on a day to day basis, but then investing for the longer term, but then also having a certain level of comfort in the current day, you know, you’ve a certain amount of financial freedom currently. And then the obvious and long term objective is to which achieved that, that ultimate financial freedom, you know what, as you near retirement or later in life where you can do whatever you want, you can, you know, use your wealth for charitable purposes, for generational purposes. I know that’s one of the things we talked about as well. So, it’s just interesting to hear your perspective on people coming from such diverse socio economic and cultural backgrounds, how you get them, basically, to the same starting point from what we’re talking about.

Danial Khan 06:34

Yeah, I’ll provide a little bit of a definition that I’ve really liked that we use when we teach. The Consumer Financial Protection Bureau, the CFPB, they define financial wellbeing more or less as having some sense of security, and freedom of choice, currently, and in the future. And so you can kind of break that down a little bit. But I think that’s something that pretty much people around the world, no matter what perspective you have, I think that can resonate with most people, that you just want to feel like you can manage the day to day. But you can also feel like you have some sense of security in what’s coming down the road, expected and unexpected. And then the freedom of choice option, especially, you know, I like to work with students and with professionals who are in the fields of like social impact. And I used to do a lot of my work with social workers. And a lot of that was learning how social workers, they really wanted to do work that was meaningful, but perhaps felt like they had to sacrifice making a living for themselves or for their family, because they wanted to have work with some sense of purpose and to serve people. But that’s not true. You don’t have to choose between one or the other. And I think working on your financial wellbeing specifically can help you be able to make decisions, and have freedom of choice to do the work that you want to do. And not have to sacrifice the important things that you value most, whether it’s your spending or your career.

Chris Dohrmann 07:57

There’s so many areas I wanted to touch on, I’m going to try and just take them slowly. Because you and John have both mentioned a couple of them. One is the audience, the classes, you know, you’ve the students that are actually coming forward, what’s the mix? Because when we look back on the podcasts we’ve done, we’ve tried to pay attention to gender equity, and the fact that women and minorities need to be included and need to be offered this type of a service, because they need to have a stronger base and need to have the structure so that they can rely on that when they receive new benefits and new challenges when they’re talking about finances.

Danial Khan 08:42

Yeah, so I mean, a couple of the offerings that we have. One of them is a course called Wellness 183 – Financial Wellness for a Healthy, Long Life. I’ve noticed in that class, as well as in our one-on-one financial coaching, that most of the, based on gender, most

identify as women. So in coaching, especially the one-on-one conversations, it might be 60 to 70% of students that I talk to are women, a lot are international students, first generation low income students, who kind of had this feeling that they really want to take control of their finances and have some sense of guidance.

Because a lot of it is not even just trying to educate, a lot of students know more than they think they know, even if it didn’t have parents that were experts or had influences in their life. And a lot of us, most people don’t have a high school personal finance requirement either. And so a lot of students are coming into Stanford or into university in general, with little to no financial education. And so even just having those first conversations, and how do you make decisions, I think is an important place to start.

And a lot of students know, I like to say, you know, you are the expert in your life. And so, I’m kind of here to help just align how you already make decisions and to clarify what you already value and aspire to with some of the ways that you can manage your personal finance now and plan for the future. But yeah, a lot of it, mostly women are the ones that are reaching out and seem to have maybe greater needs around this, especially when you talk about gender equity.

John Bagdonas 10:18

One thing that I think cuts across genders obviously is student debt, it’s very interesting in terms of how you coach undergrads and alumni in terms of how do they manage that going forward, where obviously that is a bit of a long term, debt, long term objective in terms of retiring that enabling them to actualize their longer term dream. So I’m just curious in terms of how you sort of coach people based on, and actually also from the Stanford experience as well, because I think that maybe student debt is not as much of a concern as it is in other places because I think Stanford can be a very generous University, depending on your circumstances.

Danial Khan 11:00

I think just trying to put myself in the position of a student again, and being, let’s say, 18, you’re going into college, and imagining having to take out a student loan where maybe you never had even took out any debt before, maybe you’ve never even had a credit card and had to have experience borrowing money.

So I think it’s a very, it can be a very emotional, emotionally draining task to think about, not just having to do your school and focus on that, and then your career. But a lot of what students are talking to me about is just a little bit of that stress of man, I know I have this thing looming when I’m done with school. And I just want to have some sort of clarity and plan for how I’m going to manage it. And to just have someone to talk to about that, before even making a plan just to express that, yeah, this feels a little stressful, but it can be a lot more manageable.

I think around student debt, a lot of it is just knowing what your payment options are, or your repayment options are. When you go to studentaid.gov, you can see all the different plans that are available, whether it’s income driven, you can stick to the standard plan, if you want to pay it off in 10 years, there’s public service loan forgiveness, there’s so many different options from the federal level, depending on the types of loans you have. But starting off, what kind of loans do you have, and how much do you have to pay off because it’s very easy to want to push that away, and not have to deal with it or think about it, especially until after you graduate. But a lot of students want to be a little more proactive, even if initially in the conversation they didn’t. Throughout the conversation, it seems like just having the information you need.

John Bagdonas 12:46

I was going to say also, the further consideration that you know, over the last couple of years at least, is higher interest rate environment that those loans were at a higher interest rate. So depending on, as you said, the choices, the repayment choices, it could be a bigger, you know, sort of monthly amount if you want to do the traditional route as 10 years. But it’s a consideration as well, as you know, same thing with credit cards, any kind of credit or debt that is extended now, it’s typically going to be at a higher rate than traditionally it has been over the last, you know, whatever, 10 years or so.

Danial Khan 13:19

And it especially if you’re in graduate school, and you don’t have the subsidized loans, a lot of times you have to go unsubsidized loans, private loans, if you’re an international student, most of the time, you have to work with scholarships, grants, private loans. And so you have this big amount, especially being at Stanford, right. But no matter where you’re going, a lot of times it can feel like a lot that you have to manage. But, again, you can’t go bankrupt, or you can’t file bankruptcy on student loans either. So not to focus on the negative. And yes, except those things that is the state of where you’re at right now and where things are at.

But what can we do to make the best of the situation? I’ve worked with PhD students who are like PhDs in comparative literature, let’s say, and there’s like a very maybe specific career path that they’re looking at, maybe they want to be a professor, but they wanted to choose this focus area as a PhD. And they have hundreds of thousands of dollars in student loans that they have to pay off.

And there’s this one student, this was when I worked at University of Buffalo, but him and his wife had nearly $200,000 in student loans. And they came into coaching, just wanting to feel a little bit better, and to have some sort of clear plan. And so throughout our sessions, it was getting the information that you need the principal amount, what’s the interest rate? Who’s your servicer? Who can you talk to? And then what are the plans that might best fit with your, your life goals, because if you want to have a house, start a family, all these things, it’s more and more common that students will delay these major life decisions because of economic burden.

And while you’re in school too or let alone, when you’re working at your first job, it can serve as a distraction and kind of make it a little less like you can focus on your work, the most important things in your life as a student, as a as an employee. So yeah, a lot of it’s about making a plan, trying to feel a little bit more in control. And feeling like I got this even though yes, this might feel like a lot. I still have a plan of action, and I have someone to hold me accountable, which I think is underutilized. The idea of having an accountability buddy, whether it’s a coach, a friend and advisor. So that really goes a long way, yeah!

Chris Dohrmann 15:42

Perfect. I mean, I think you’ve hit on a number of different things that we wanted to address. One is it’s very gratifying that people are seeking help or seeking guidance, because you don’t know what you don’t know. I personally went to school with people that I guarantee were paying for the pizza they had on every Friday night for five years that could be classified as bad debt. There is good debt as far as a car or student loan or whatever and knowing the difference. And knowing that you have a plan to approach it, I think enables people to be in a much more grounded place, when they’re talking about wealth, and what they can get from a new job, and what’s going to what that’s going to bring them. So it’s very gratifying that people are seeking it out, and that you have people that are embracing this class. I wanted you to mention a couple of things that we’ve talked about, with people that come back to you, maybe a year later, because you talked about this has to be a continuing effort. Maybe if you can give us a little story about people that have come back and said, how this has worked for them?

Danial Khan 16:43

Yeah, so some examples. I mean, that’s really important, because I mentioned that, that one intervention is only going to go so far and promoting someone’s sense of financial wellbeing and promoting their circumstances. So one example that often comes up is a lot of the students that just want to have the foundations for investing. A lot of it is, I’ve heard about a Roth IRA. And I do want to plan for the future. And I feel like this might be the best place to start. And so a lot of our conversations and coaching are just opening the account, automating some contributions, and just choosing an index. And I don’t recommend anything specific, but going the route of low cost index funds, and just choosing one or a couple that resonate with how you want to manage your risk and your time horizon. So they might choose an index fund, and they just buy one, one share of it right. And then they’ll follow up, maybe like a year later. And maybe they’re coming with a different topic like now, it’s like I’m trying to prepare for tax season right now. And it’s the first time I’m doing it on my own, versus doing it through my parents’ accountant or whatever it is.

And they’ll mention that. Now I’m like, fully funding my Roth IRA each year. And they have like a concrete plan of like, this is how much I’m actually going to have for retirement, it feels really good just to know that I have a little bit more sense of security in my future, where, because I like to tie in this idea of your future self. And we often don’t have this solid relationship with our future selves. It’s almost like it’s a stranger. And so how do we right where we’re at, think about how will my future self be feeling about the way that I made decisions today. And I think that can be pretty powerful.

So yeah, investing, and just getting those first steps, and also paying off debt. I feel like that’s something that means a lot, because I had my family and I had an interesting relationship with debt. I feel like I learned a lot about how you have conversations about money, and how that can produce some conflict, specifically around debt. And that’s something that I really want to learn more about, because relationships and money is very important to me, but also not having to feel like you have this monster on the other side, which can often be high interest debt from a credit card that is very easy to just let go by. And when I get to hear back from a student after they’ve had coaching, or been in the course, and they say that, you know, I started off feeling like this is unmanageable, and I wasn’t willing to do something about it in the moment. But just after our conversations and having those first steps to work on, and now automatically paying off my credit card debt, I already have like one credit card paid off or two, and now I’m focusing on my student loans, or now I can actually start investing. So those are some of the examples that I really like to hear when they come back.

John Bagdonas 19:53

You know, I was going to add to that one thing that’s very, you know, important from the standpoint of wellness is that wholeness and completeness, a person that we’re talking about financial aspects, but, and I remember you bringing up this point when we first talked about the difference between financial literacy and financial wellness, and sometimes people think that those are synonyms, but they’re absolutely not.

And in fact, I know you don’t even like to use the term financial literacy because it could be a put off to people that are not from a financial background or have any kind of financial savviness. And that there’s really financial literacy, just understanding the concept really, there’s no necessarily choice or any kind of emotion that’s associated with it. There’s no wholeness, it just basically the tools of potentially how you can achieve financial wellness, and that I think you bring up such a really, really good point about how finances is so fundamental to human relationships. Whether that’s, I mean, in a utopian state, it wouldn’t be but in reality it is and that so many relationships go sour because of the fact that there’s not communication about, you, you’ve brought up your own personal example and how it drove you to learn or to want to understand so much more because the on your own sort of family adventure but or voyage I should say.

But it’s very interesting and I think from particularly from a social worker standpoint, your background that to integrate the two, it’s just so important terms of being successful, because you can understand the concepts, but if you don’t integrate it into your whole experience and in your game plan for life, you’re not necessarily going to succeed, particularly as things change. You know, that’s one of the things we talked about a lot is how things are changing how, you know, banks are changing how, you know, cash is going to be a thing of the past.

But back to the point about that wholeness, maybe just talk a little bit more about that, beyond just financial in terms of, I know, you touched on a couple of the success stories about how you ground the person into making them actualize their future, and you know, their future happiness by being in control of it.

Danial Khan 22:06

Yeah, really, my passion and the place where I see my role in this field, as well as the stories that have felt the most satisfying to hear. And I know feel the best for students are the ones that students just feel healthier, they feel more in control, they feel less stressed, they feel more confident in making decisions. And, you know, I don’t use the term financial literacy very often because I just see my role in this space to be more focused on promoting health. And, yes, promoting education as well. So yeah, like, I don’t think there’s anything wrong with the intent behind financial literacy, it’s more that I think it’s used as a term, as a catch all. And I think this wellness focus really is powerful because it represents the whole person, like you mentioned. And it makes it more accessible to learn about personal finance and more relevant to people. Because, I mean, we’ve talked about this in a past call, but it Stanford for our mind over money program, their financial wellness program, we use these reframes, which we call financial capability, focus areas. And so instead of the budgeting, credit, debt investing, we use terms like spend mindfully, earn enough, borrow with intention, grow your money. And I think for anyone, those things seem a lot more relevant or personal.

And just if it’s enough to get a student or an early career professional, to just get their foot in the door, when before they may have had these scripts in their head that investing is not for me, but I do want to grow my money. I think that that can be, especially for certain, you know, like, with women, it can be often that there is this stereotype that like investing is not for women, right? And I think that’s something that is definitely changing. Where, no, that’s not true at all. And I think interventions like ours that are focused on not just how do you navigate the financial world? But also how do you make it personal and relevant to you, because everyone has their unique situation, and life goals? So how do we line what you do about your money, how you feel about your money, and what you’re planning for, with the things that are most important in your life? So we don’t start with budgeting. We start with what are your values and your aspirations? And how do you clarify those in a way that’s going to set you up for these next things in your financial life that can best promote that.

So yeah, I come from philosophy, psychology and health promotion background, as well as my social work and MBA. And I like to think of these first steps as just developing mindfulness and intentionality in your financial life. So it just makes it a lot more approachable and accessible for majority of people who don’t have a financial background, maybe.

Chris Dohrmann 25:07

I’m so impressed with the positive spin that you and the program seemed to put on this, I just want to wrap up with maybe two things that are very topical for this generation. University is probably when you’re most idealistic in the world. And that is, if it can be sustained as long as possible, is life changing. So it’s really something that’s very helpful going forward to have a positive mental attitude.

So I wanted to talk about this generation is probably going to be the recipient, and maybe the next. So generation Y and Z are going to be the recipients of some of the largest transfer of wealth in history, you know, from baby boomers. It’ll happen over a period of 20 years, but the likelihood that’s already started, and back to my point about idealism, does philanthropy and you know, trying to carve out a piece of your budgets or your thinking, do you talk about giving coming into play as well?

Danial Khan 26:08

Yeah, this was actually an important topic for me over the last, in my early 20s, especially, I had this like social media page and this movement, I was trying to start called One for All. And it was just about trying to make the world a bit better. And how you can start

now with the little things that can best promote this state of giving that makes it more important to you throughout your rest of your life. So for example, starting off, if you don’t have much, how can maybe giving me a motivation for a savings goal where let’s say, by the end of the year, you have this giving goal in your budget, or in your saving plan, so that you can contribute to like a meaningful cause in your life. So I don’t know, I think, right now, it might philanthropy might seem like a very distant thing that’s only for maybe like corporate foundations or for like, very, very wealthy people.

But I do feel like I want to help encourage younger people to even try to give and doesn’t have to be with actual donations like monetary donations, it can be with your time, like sweat equity, and I just having some state of giving while you’re trying to grow your wealth, and especially when we have this wealth transfer. I think getting clear on that, about what are the little things you would do now without having a lot of wealth, that might be able to scale down the road, when you actually do have greater resources.

Because I think sometimes people, they get this influx of capital that they can decide what they want to do with and they hear like, oh, you should be putting it towards philanthropic efforts. But if you don’t have that practice, you might just be solely relying on someone else to like, handle it for you. And that it doesn’t go to something that’s like, values driven, I suppose. So yeah. I don’t know if that answers the question. But I think the things that you can start with today, and the little ways that you can develop that giving mindset and practice, I think is probably the best way to inform how you might give when you start to scale your wealth, and have more resources to share with the world.

Chris Dohrmann 28:16

I think it’s perfect! Thank you!

John Bagdonas 28:18

Danial, this has been great! This has been exactly what, you know, Chris and I have talked about from the standpoint of being proactive in financial wellness and completeness in a person and we thought this was going to be a great session. And it really has been and we want to thank you so much for your thoughts, your insights, the anecdotes you’ve shared and best of luck to you and your program at Stanford. And I know you’ve already been successful. I’m sure you’re going to continue to be successful with everything you do at Stanford. Thanks again.

Danial Khan 28:50

Thank you. I really appreciate the time!

Chris Dohrmann 28:53

A huge thank you to our guest, Danial Khan, Manager of the Mind Over Money Financial Wellness Program at Stanford University. It’s been great talking to you!

And that’s it for another episode! Thank you for listening to Own Up by Global Shares. If you found our podcast helpful, I hope you’ll consider sharing or recommending us to your peers. Until next time, from me Chris Dohrmann, and my colleague John Bagdonas, thanks for listening and take care!