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The Equity Dilemma with Robyn Shutak · Disengaged

• James A. Seechurn: Hello and welcome to another episode of the as discussed podcast. Today I'm joined by Robin Schutak of Infinite Equity. Robin has spent 25 years in equity compensation. is truly an expert in this space. She is a certified equity professional, fellow of global equity. and an active CEP advisory board member. Infinite Equity themselves have a product called My Equity Choice, which is designed to help administer equity choice programs, which is something that Robin and I talked about our podcast today. In this conversation, we covered a lot of different areas. started talking about just the recent challenges that. are facing in the world of equity. ⁓ talked a bit about what it means to be underwater with equity and what that means for employees and how companies can go about solving that problem. We talked about ⁓ whether companies offer a choice with equity. Should they let employees choose whether they take options or RSUs or maybe even cash like Netflix do and what that and the challenges that creates, but also the opportunities it creates for companies to differentiate themselves in the market. Thank We also spent some time talking about the role of equity, what it means to be an owner in the company and whether employees truly do have ownership in modern equity programs, particularly when it comes to VC backed companies ⁓ listed companies. Finally, Robin asked me a little bit about my next book coming up as well. So if you're interested to hear my thoughts on that and where I am in that process, stick around until the end of this podcast. So without further ado, I give you Robin Schutak of Infinite Equity, and I hope you enjoy it. So Robin, nice to see you. How are doing? Robyn Shutak: I am doing great and yourself, James. James A. Seechurn: I'm doing well in a sweltering San Francisco. so let's see. What should we talk about today? we're here talk mostly about equity. You obviously have ton of in the equity space. So I've been looking forward to this for a while, because I'm going to absolutely mine you for information around equity. And I've got a feeling a lot of people will be very interested to learn a few things about the basics of equity and also about how you and your colleagues at Infinite Equity tackle. client problems because a lot of companies have challenges around equity right now, both in terms of the details, but also philosophically how equity gets used to attract and retain people. So in that vein, I just want to open up by asking you, what are you seeing right now in the of equity? What are the big challenges that companies are facing? Robyn Shutak: Yes, so I think the workforce is different and companies are seeing that employees are not staying as long as they used to. So how do we solve for that? An easy fix is around vesting schedules. So playing with vesting to then create an opportunity for people who are not staying in the workforce or companies as long as they used to ⁓ in such a way that it delivers value more quickly. So we're seeing a lot of one-year vesting schedules, three-year vesting schedules, oftentimes with a reduction in the amount of equity being delivered and that's to account for the more quickly delivered value of equity. So in my short answer here, vesting is an easy lever in which you can pull to make some creative adjustments to your programs and also not. to go to any sort of extraordinary lengths to make a design change that fundamentally shifts your program. It's more of that quick fix with vesting and that's because we are seeing a workforce that is much more mobile in terms of how long they stay and how long we're going to expect them to stay. So we want to react to that. We want to address that and recognize that maybe keeping people for four years with a longer vesting schedule isn't always the answer because is that really motivational if people are only staying to just kind of rest and vest if you will. James A. Seechurn: Mm-hmm. Yeah, yeah. And I want to come back to that by this idea of equity as a retention mechanism. We'll come back to that in a second. Before we do that for the uninitiated, what is vesting? What does it mean? Why do people care about it? There's a lot of people out there, they get equity and they get told these words and it's like a whole nother language. You know that phrase, if a lion could speak English, you still wouldn't understand it. I feel like it's the same with equity. So for people out there may be unfamiliar with what that means, what exactly does that mean ⁓ and what is the difference? between a three-year vest and a one-year vest and a four-year vest. Robyn Shutak: That's a really great question and sorry to be remiss on just assuming everyone would understand what vesting is, but it's basically the time in which you get to earn the equity that's been granted to you. So for example, if I start at a company and I'm given a thousand shares at the time of hire, those shares are not all of, they're not all mine at the time of grant. I have to earn them and that typically comes with service, the time in which I'm employed with the company and sometimes it's four historically it has been four years. What we're seeing now is something more. like a three year, as I talked about, and sometimes a two year. ⁓ companies are getting very aggressive. They are even going to one year vesting and ⁓ immediate vesting. ⁓ when talk about vesting, it's just really ⁓ the in which you get to actually earn your shares ⁓ and have to ⁓ provide to then earn your shares or ⁓ your equity over time. ⁓ James A. Seechurn: Hmm. Hmm. Yeah, so the feels on the face of it, that seems like a good thing for employees on the face of it. If you have to wait for one year instead of four years to earn that equity, then that feels like a free gimme by the company. But I assume that comes with a downside, which is the value that they're actually awarding in those shorter vesting schedules. Robyn Shutak: And that is true, I'm curious what your thought is too, is the perceived value of an award that's over one year time, so a grant of shares over one year, if I normally get 1,000 shares over a four year period of time, and in this case maybe I get two or 300 less because we're not talking about a four year period cycle. but the value I get is quicker and it's immediate. Exactly. What do you think about that? Because to me, perception can change in that dynamic. James A. Seechurn: It's immediate. Hmm. There's a cynical side of me and a non-cynical side of me with this one. The cynical side of me says whenever I see shorter vesting schedules, that's a company trying to award fewer shares to its employees. And because I have, they're asking, you know, this has happened in the past in order to get away with lower grants. So, all we're going to give you less, but don't worry, you're going to invest quicker. So in the immediate term, it's a way to give fewer shares, but whilst also making it not seem as penalizing, right? Robyn Shutak: Ha Yes, yes, and I appreciate that perspective, but also when you talk about what our company is dealing with today, not only is it just that ⁓ that move in types and in terms of how people are being employed, current state, we've got, you know, talent. is intense, hiring cycles are fast, and employees might not stay that long. In that case, we need to kind of respond to the current market, and also, we have a lot of companies dealing with burn rate issues, and they need to address that, and the way to address that is perhaps by a reduced grant to accomplish some of those other goals, not only as it relates to just some of those other... James A. Seechurn: Mm. Right. Robyn Shutak: area that we spoke about on vesting. We're trying to accomplish other things there within that change in practice. James A. Seechurn: Yeah, and the burn rate, that's how much equity you're giving away. So companies have had to use a lot of equity to get to attract people, but that means that they're kind of burning through it. And boards don't like that, don't like it when you're burning through equity really quickly. Robyn Shutak: Yes, thank you for putting it in layman's terms. Absolutely. And we've seen a lot of that trying to manage that burn and the way to manage that can be with that reduced value being delivered and more immediate. And so that's a way to kind of temper it, but also a way to maybe not have to reduce eligibility because a lot of times when we're faced with some of these other challenges around dilution, how much we're diluting our pool of, our shareholders out there and also that burn that the amount of shares that we're going through, we're having to think about how we can also impact our program, meaning from an eligibility perspective. And that can be challenging if we're granting broad-based equity and then now all of a sudden we can't do that because we're faced with these other constraints. So this might be a way to sort of meet people in the middle and not have to take away eligibility. James A. Seechurn: going. Yeah, yeah. yeah, so you've got these factors, you've the burn rate, you've got the value of the award. ⁓ the non-cynical side of me wants to believe that companies recognise that trapping people to companies with vesting schedules is not a good means of pretension. So ⁓ ⁓ there's a general view, ⁓ I think it's a wrong view, ⁓ equity retains people. But if you've got equity on the table, so we talked about vesting schedules, if you're there, you're near one, you don't get all that equity if you tomorrow and for that reason you are more likely to stay with the company and yes all things being equal you would be more likely to stay because you would lose out on that equity however we've also seen that in the tech sector very equity rich sector high and ever higher rates of turnover and lower tenure among companies so there's not much evidence to say that equity does actually retain anyone so the non-cynical side of me wants to believe that companies are recognizing that there's more of value to creating owners quickly and letting them actually share a stake in the success of the company than there is in trying to golden handcuff them to stick around longer. Robyn Shutak: Totally, I feel that a lot and I'm aligned with it because I think Vesting really can influence behavior, but it rarely is the main reason that people stay. do you stay at a company? You stay because you're doing interesting work, you career growth opportunities, you like the culture, ⁓ the and overall compensation important, but my perspective is vesting may influence retention, but it rarely ⁓ it is my opinion. James A. Seechurn: Hmm. think it makes people think twice ⁓ and then they might stick around a longer to get their next tranche of vesting. ⁓ But it's like a fake retention. It's real retention. And I always say, is the reason that you want people sticking around because they're waiting for the next vesting schedule because they're probably quite quitting and interviewing elsewhere. just it's not a good kind of retention to me. Robyn Shutak: ⁓ my gosh. That is absolutely true and I'm super aligned with that. I think that it's like that rest invest mentality and if you feel trapped, motivation drops, ⁓ whole ownership mindset, it And so ⁓ in mind, I think it should be, know. an exciting thing that is delivered quickly, we might just have to reframe how we think of equity. Long-term incentives, it may not just be that any longer. It may be something else, and especially in an AI world, people feel trapped that motivation drops that whole spirit of ownership that mindset that we're trying Infuse with equity compensation ⁓ that just completely disappears. So ⁓ I don't really think we're doing ourselves ⁓ any any favors by actually ⁓ James A. Seechurn: Mm. Robyn Shutak: trying to create vesting schedules that keep people handcuffed. James A. Seechurn: You're in. And it's kind of like, it's like almost like two messages in one. On the one hand, we want you to be an owner, think like an owner, act like an owner. This is the whole thing. Like you hear a lot of this in companies, act like an owner, but ownership mentality, entrepreneurial mindset. On the other hand, but we don't trust you with the equity that you're to have to wait for that bit. It's kind of like, it's like, you know, we talk about actions and words a lot when it comes to living the value proposition of a company. The words often say this thing and then the actions are, but we're not going to give it to you straight away. to prove that you're going to to earn the right to get that equity. And then you couple that with performance-based equity grants as well. And then they're saying, not only do we not trust you to be an owner straight away, you've got to demonstrate through a very flawed performance management program that you deserve as much equity as you think you do. So it's treating people like children in a way, saying you've got to earn it and you've got to prove yourself. Otherwise, you're not going to get all that equity in the first place. Robyn Shutak: It's so true, that's an interesting thought there. It also kind of goes back to that concept of giving a large new hire grant for someone that you've never had within your organization. and putting all your eggs in the basket of a new hire person, which is like, what happened to like pay for performance in the spirit of like, come here, show your value and then earn a reward that is really meaningful, kind of a separate conversation, but in the spirit of what we're talking about, it is true in the sense that like, give people ownership, let's not have them... to wait the duration to get that ownership, but also maybe think about it in the sense that you can be eligible for additional equity year over year or more frequently and that compounding effect can be very valuable and sticky for people to stay around. Even if they're earning it more quickly, it's still in less form. It's still James A. Seechurn: me. Robyn Shutak: very valuable over time. And so I think there's a way to accomplish that ownership mindset within the parameters of what you just discussed through something that's maybe shorter and more immediate and then layering onto it year over year and makes things really meaningful from an ownership perspective. James A. Seechurn: Mm-hmm. Yeah. Yeah. And I want to come back to that as well. We'll come back to that later on and what that ownership really means in the context of particularly public companies and VC banks. But before we get there, something I wanted to check with you. When it comes to investing, mentioned companies are shifting from four years to three years, which, you know, this general trend towards shorter. But from the data I've seen, it's not happening as much in the private market in the VC bank market. This is generally a tendency to stick with four years. And this brings me on to another point, is, particularly with a VC backed company. that vesting schedule, which is really where a lot of equity ownership started out was in the private world from companies that couldn't afford to pay cash that award equity instead. But that vesting schedule was really there not to retain people, but to protect the cap table. this this idea of cap table management, which is a phrase that comes up a lot in VC backed companies. ⁓ ⁓ guess that that's, know, that I guess my my topic of conversation here is like, ⁓ you expect the same changes to happen in the private market? Or is that ⁓ of protecting the cap table is that going to kind of keep our longer vesting schedules in place for a Robyn Shutak: think you're spot on in terms of how we're seeing it and I sort of made a sweeping statement at the beginning of this discussion to say that we're seeing this trend happening. But what I should have said is that it is really in the public market space. Private companies, to your point, a very different dynamic and very much in line with what you said about. how we want to structure the cap table in the spirit of vesting and how that aligns. so to your point, it's like that growing, growing with the cap table company mindset that is super powerful and it aligns employees with the company performance. I think... we probably will not see a big shift in terms of that four year vesting within the private space because of that. And it's sort of that like, let's grow with the company. Let's help grow the company over time as a shareholder and what you can contribute to the actual value of the organization. And the same mindset, that spirit exists within the public company space, but it's oftentimes harder because we're under so many constraints and maybe we're not all at the same level of input. James A. Seechurn: Hmm. Robyn Shutak: influence in terms of how we can shape the value of the organization. But in a private company space, a certain type of private company, that's very different. so a shorter answer to your question is I'm very much in agreement with what you're saying. And I appreciate you calling that out because it is different in terms of what is actually happening on investing in private market space and then also why. James A. Seechurn: I think with the VC back companies in particular, ⁓ it does down to like, you just don't want a string of ex-employees on your cap table. It makes things complicated. ⁓ know, future don't like it. It dilutes their ownership. It generally creates a bit of a headache, doesn't it? If you start, you went with an immediate vest, day one vest in a private company, you'd create all these behind the scenes problems, I imagine, for your cap table management people. Robyn Shutak: Absolutely, and I think that's ⁓ a bigger battle to face than what anybody really wants. absolutely, I think that's a very solid reason. James A. Seechurn: Yeah. And sticking with actually with the private companies, I know you've got some thoughts on this next question. So I wanted to get into this. Underwater equity, this notion of underwater equity tends to apply more to VC backed companies because of stock options. well, actually, before we go on, probably should talk about what underwater equity even means. if you are an employee and you're in this scenario and you hear the words underwater equity, it sounds awful. Sounds horrible. How bad is it? What does it actually mean for people when they're in that scenario? Robyn Shutak: And when we talk about that, just to clarify, it could be either private or public market. Do you want to focus on one versus the other? James A. Seechurn: Mm. Well, think for employees it probably applies more in the private because they receive stock options, but it also applies to executives, I assume, quite a lot in the public market as well. So that's kind of where I was kind of excluding the executives from the conversation, but yeah, it applies to both. Robyn Shutak: Sure, sure. And I think just to build on that a little bit, what we see too is exactly in the private market a lot, but also then in the public market space where you have a lot of biotech or life sciences companies that still are continuing to grant options just because that is the predominant vehicle there. James A. Seechurn: Hmm. Robyn Shutak: there's a lot of growth trajectory in many of those companies. So it does apply to both, but a little bit more spotty. Underwater just means your equity really doesn't have any value. So for example, if you grant a stock option to an employee at $10 and the value of the company hasn't grown, and in fact it's the opposite to say maybe five dollars at current price. ⁓ your stock options are effectively underwater. You wouldn't buy a $10 stock option when the company is $5 in value or at your strike price. That just doesn't make sense. So in that case, they're not retentive. There's no value and that's really demotivating for employees and that can have a lot of implications for both. the organization and then also for your people within the organization from a company and an employee side. James A. Seechurn: So basically you've given me a stock option. You said I could have bought it at say $5 a share. Now I know that equity is worth less than $5 a share. So it's literally worth nothing to me. ⁓ That's the underwater scenario for me. Robyn Shutak: Effectively, yep. And what actually happens is employees don't provide any sort of discount for underwater equity. They zero it out. It's just not worth anything. It's not like a 20 % discount in terms of like that value of that underwater equity. James A. Seechurn: brain. Hmm. Robyn Shutak: those two don't even really go together value and underwater, but like you could effectively say, well, it's only like 20 % underwater. It's still sort of valuable to me. They just see it as like, this doesn't mean anything to me. And then there's like no retention value there. James A. Seechurn: Right. And equity in general as well. It is slightly more ephemeral in nature, obviously more than cash. There is especially in the VC back market, but also in the public markets as well. And like you mentioned, biotechs, there is a bit of snake oil this that employees immediately the perceived value because they know it's not really ⁓ real. It be real, but it might not be real. You don't really know that for sure. ⁓ So think if you take that snake oil and compound it with the word underwater, ⁓ and it's pretty easy for an employee to affect mentally, just write that down to zero. Robyn Shutak: Absolutely, a lot of times we say it's like that lottery ticket. So first of all, if it's underwater, that perception is just, this doesn't mean anything for me. I don't care about it. But then also, it's like that lottery ticket mindset. Like I'm never going to see. the value realized from this. And so in that case, I think that is so important because you then risk losing those builders of the companies that we're trying to create. ⁓ then you've got like equity not being that differentiator. And a lot of times that these private companies, equity is a significant part of compensation. We've sacrificed some salary potentially to ⁓ to get more equity because that's an easier way for private companies to compensate employees. But then that differentiator is completely broken and then you lose that ownership culture that you're looking to infuse within your organization. So you have a lot of problems that you're trying to overcome there and that's hard. James A. Seechurn: Yeah, yeah. Okay, so what do companies do? if you've got a client that comes to you with underwater stock options, what are the possible courses of action and what is the kind of approach that you recommend in those scenarios? Robyn Shutak: I, there's a lot of different ways you can think about it and, know, it's, More than anything, I think silence and not addressing it is not an answer. I think you have to get ahead of it and share. You have to share something because people will fill in the gaps invariably, right? Like if somebody doesn't tell me what's happening, then I'm gonna make all kinds of assumptions. So I definitely think that the most important thing is to have conversations around. James A. Seechurn: Mm. Robyn Shutak: that the company is assessing the situation, we value equity as a part of our compensation, and we may need to rethink our philosophy, and then go through the strategy of thinking through how far the equity is underwater. within the certain grants that you have made historically. so how far are these awards underwater as compared to maybe people who were newly hired and how do we address this certain segment versus another segment? And then we look at potentially, okay, if we did do something around an option. repricing or an exchange, what would that look like from a new vesting schedule Do we want to restart vesting to start some new retention ⁓ do we want to... ⁓ James A. Seechurn: Mm. Mm. Robyn Shutak: keep the vesting schedule, maybe reduce the value that we're delivering. There's a lot of different things that you can think about as you go through that strategy conversation and how to maybe remedy this within your organization. Maybe it's a one-time new grant that can be another way to accomplish it. There's many different ways to go about it, but the one thing that I would caution is just to never not... ⁓ James A. Seechurn: Hmm. Robyn Shutak: share that you're looking for ways to restore value and that you do not acknowledge the problem. is not, that is never the answer. James A. Seechurn: Mm. ⁓ your point, you can't not say right? have to say something. And I think you made a good point. you don't say anything, will make their own story. Don't take their silences. content is like science is not golden when it comes to this kind of thing. If they're not talking, it probably means they've made an assumption that assumption probably isn't a positive one. So I think doing doing something, some kind of dialogue to your point is really important to guard against that. And also to learn a thing what they what they think about it, you know, how big they perceive this as a problem. There's another thing you mentioned, if a new person joins the company, and that strike price is lower, they immediately get something that's more valuable than the person who has been there for five years is currently sitting on. They can have 100,000 shares. Robyn Shutak: us. James A. Seechurn: But one share for that new person is worth more because it's got a lower strike price in theory, right? you get this bizarre situation where new joiners are much more favorable. ⁓ imagine this happens quite a lot with biotechs as well, because the price can go up and down depending on clinical trial success and that kind of thing. So I want to go through the options then you So repricing you mentioned is one. So is that where you just literally go back and ⁓ retroactively adjust the strike price? Robyn Shutak: Yes. That's more of a technical area that would require some, a couple of things. You would definitely want to involve your legal team to make sure that what you can and can't do is permitted within the parameters of your stock plan. Typically a repricing is yes, just effectively repricing the strike price of the awards. There are downstream ramifications. James A. Seechurn: Okay. So same same investing schedule like, yeah, just say nothing, nothing changes apart from that strike price, but that's okay. Robyn Shutak: effectively exactly and so that that can be one way to accomplish it it can also be just another retention grant which that James A. Seechurn: Mm. Hmm. Robyn Shutak: that's a possibility, but you then are also diluting the company even further because you're granting additional chairs, which is another angle here that needs to be contemplated because what are you comfortable with from a dilution perspective? that's something else to consider. There's also potentially a cash component. If the company is cash rich, then they could effectively provide some cash compensation, maybe even tied to vesting. There's ways to accomplish it and that's not the full spectrum, there's definitely, that's what we do. We have a team of people who look at some of these things and contemplate what are the right approaches. I would say though that kind of building on this a little bit is that one, I mentioned. Just doing nothing the safe option. It's just an unacknowledged ⁓ But then also, sometimes ⁓ it's ⁓ maybe uncomfortable, ⁓ but not every number requires action. for like stock price very volatile and the markets are very volatile. So when we about James A. Seechurn: Mm-hmm. Robyn Shutak: or the public market, for example, and the universe of biotechs or life science companies that might be experiencing some challenges here. We hear Sazmageddon, Sazapocalypse. There's a lot of companies out there who are facing all of that volatility that are like, how do I respond to this? We can't just do nothing, but maybe you can. Maybe you look at this time is a blip period and we have to just ride through it even though comfortable but we should look at the longer duration, the time frame in which we're dealing with and if it's only a three month problem then maybe we just sit uncomfortably and do nothing. James A. Seechurn: is an point. So ⁓ equity is by a volatile thing. is a financial instrument, a derivative. ⁓ It's whole ⁓ d'etre is be volatile and unpredictable. That is the nature of what it is. If you want predictability, cash is the predictable thing. But the whole point of equity is exposure to noise in the value your company. So ⁓ to some degree, you to accept that a bit. You have to accept that stock goes down as well as up. awarding stock to employees, again, you are ⁓ becoming, to a degree, a financial advisor. And it should come with that same warning. ⁓ can go down as well as up. Be aware of the risks that you're facing. So I There's some scenarios where you just have to explain to people, look, we gave you equity. You knew what it was. hopefully, the company provide some education around what the risks are associated with that. But there are downsides to equity as well as upsides. Robyn Shutak: I don't know that I can add to that because I completely agree. That's beautifully said and it is so true. It's like you're investing in the stock market in some way and that is a risk. It comes with risk and we can't control that. so... James A. Seechurn: you Robyn Shutak: We have to live with that risk. It's inherent with equity and we absolutely need to communicate that. And I think, you know, one of the things that we wanted to talk about was just some of those communication challenges and opportunities out there. But also just recognizing what you said, equity is volatile, but if we react, some of those changes that we might react upon. can be difficult to unwind if they don't work. They're not always easy to implement. And so, yeah, it might just be better to just communicate upfront that we're holding steady and we'll give it time. Equity market is volatile and we will make adjustments as we see fit in the future if it comes to that. But you're right. And it's kind of funny. ⁓ Maybe I could go on a little bit of a tangent, but we see this a lot with ESPP programs, employee stock purchase programs, and if your audience isn't familiar with those, they're really great benefit programs that provide some real opportunities to become owners of the company through payroll contributions, and that's where employees have to actually elect into the program and contribute their own dollars. But what I was going to allude on this is that, almost every time that the stock price is down within a company. and there's an employee stock purchase plan. And these are public company programs mostly. Employees withdraw from the program because they freak out and think, ⁓ my gosh, the stock's down and I am worried that the value of my investment is no longer going to be what I thought it was. When in fact, it's just the best time to buy equity. And it's a different kind of instrument, but it's a fantastic instrument because if the stock price is down, you're getting to buy companies James A. Seechurn: Yeah. Robyn Shutak: stock at a discount. So it's really getting employees comfortable with that market and that fluctuation that is inherent with any sort of component of being a part of that equity world. So I guess I sort of over to another world of conversation and a different equity instrument, but I think it's that nice correlation around the fact that we don't know what's going to happen with equity and we shouldn't always react when the market is down or when it's up because when it's down, especially in an employee stock purchase plan environment, that can be the best time to buy and that all kind of comes back to messaging. James A. Seechurn: Yeah. I'm huge fan of the ESPP, by the way. I think it's a great scheme, partly because there is no performance criteria around it. It is purely up to the individual as to whether they want to participate in this program, which makes it much healthier, I think, because it doesn't interfere with the performance. It means that if you want to be an owner in the company, you can be. If you don't, you don't have to be. But I do remember ⁓ A colleague of mine, Scott Sands at Aon, he said that even if you have to borrow money to maximize the ESPP, you should. It's one of the best employee benefits that you can often get. And to your point, people don't like it because of that risk. We could get into prospect theory and things like that. People perceive the downside much more strongly on the upside of any given thing. And people do and therefore don't participate. And to your point, they don't participate at exactly the time when they should be participating, which is when the stock's not doing very well. both a low price and a discount of 15 or 20 percent depending on the company. So yeah, I'm a big fan of it. It's such a wonderful program and I love the fact that it's completely decoupled by design from any kind of performance. Robyn Shutak: Exactly. You're absolutely right and it's funny, I know we were gonna kind of touch on choice, but it really is a choice program, quite frankly, and when we ask... people all the time, we say, hey, do you have a choice program? And they say, no. And when I say choice, I say within the constraints of equity compensation, which it isn't necessarily the most prevalent practice, meaning our issues versus options and getting to kind of choose your type of equity that you would like to have within your portfolio. But when I talk about it with. in the ESPP, I say, you do have a choice program because to your point, people have to buy into it and at what election rate. And so that is a choice program inherently. And they are so wonderful because of that. And opting in, there's something really beautiful about having to opt in to ⁓ a program and the value that it creates for engagement. James A. Seechurn: Yeah, yeah, I agree. Well, let's talk about choice then, because this is something I'm keen to get your thoughts on. before we get into overall choice, because there's different levels of choice. And the first level of choice is that every employee gets to decide where they work. So one way or another, do choose as to how they get paid. We always think about choice within the confines of the company we're talking about. The employees, the best choice that employees have is where they work, and they essentially choose their feet at the end of the day. ⁓ ⁓ an element of choice there. ⁓ Robyn Shutak: Yeah. James A. Seechurn: But if we think about just around equity, probably the most visible famous example is Netflix and they've varying degrees of choice or have experiments with varying degrees of choice. But the type of choice you mean is what we'll talk about first. That's options versus RSUs, right? And the ability of the employee to pick between two vehicles depending on their, presumably with an appetite for risk. Robyn Shutak: Absolutely, you you're spot-on. So within the parameters of the equity type of program being offered at the organization people effectively get to decide what type of equity that they would like to get and you're right Netflix has a very compelling program It's a very interesting and if you want to hear about it or read about it You can just Google it and it's been academically studied. It's fascinating and I won't proclaim to know all about it, but people actually I believe can sacrifice salary in lieu of stock options and it's very high risk high reward. And I'd love a good high risk high reward program. In the spirit of what I'm speaking about here is really just more of a traditional program and it's not necessarily your new hire grant, it might be your annual refresh, mostly in the public space and that would be a choice between typically some form of stock options and RSUs and ⁓ some sort of blend. tier. like perhaps you get 50-50, 50 % options, 50 % RSUs, and then it sort of goes up and down the chain and that gives people a lot of variability in terms of how they want to structure their overall equity choice. And so that's the construct that I'm typically describing. There are programs out there that are also RSUs and cash, which I also like. And I think that's really interesting without having to then take away broad-based eligibility because maybe people just don't find value in equity at a certain level. Why not let them make that decision rather than removing that eligibility for people who ⁓ maybe just want the cash, let them decide. And so that RSU versus cash arrangement I think works well for that sort of thought process around how you approach equity. James A. Seechurn: Right, right. So there are a few things to consider here then. So there's a sort of philosophical side of this, whether as an employer you are willing to allow your employees to figure out how they want to earn money. There's also administratively a side to this as well. So. Let's start with the administrative side of things. So I imagine a lot of equity professionals, if they are only listening, will at the idea of equity choice and think, this sounds like a massive headache. This is going to be so hard to administer. ⁓ the other, and then the ⁓ on for me is always, what does that mean for pay equity analysis? ⁓ then it does complicate the pay equity analysis. ⁓ But I'm almost going to address my own one there. You already have to look at Total Comp anyway. So it's just creating some kind of equivalence between the different cash and equity scenarios. So you can solve pay equity with that. But there does also have to be some administrative solution, right, to offering people the option. So how common is that? And how easy is it to shift to a model where you allow employees to choose their vehicle? Robyn Shutak: Historically, I don't think that there was a very good mechanism out there to effectively deliver a good experience for employees and administrators to offer these type of choice programs. I think that's evolving more of the record keeping systems out there now have some capabilities that maybe have been purpose built because there are companies who are now instituting them and demanding or commanding that their record keepers keep up and help them and offer that. And so, That was always a barrier to entry that I think is changing over time. To execute a choice program and actually. make it successful, is an exercise in communication for sure because now you have to choose maybe from stock options versus RSUs and so people have to understand both and what the trade-offs are. However, that isn't a downside in my mind because it is an opportunity for people to be much more engaged in their compensation. When you have to actually research what it is that you're getting, you become much more invested in it and that creates just James A. Seechurn: Hmm. Right. Robyn Shutak: a whole personalized journey that maybe never existed before. It sort of forces people to ⁓ become more active in what it is they're deciding. It's like if I only got... Pasta for dinner. I didn't have a choice. I Wouldn't maybe ask a lot about it I wouldn't want to understand like how it was made or whatnot. I this might not be a very good analogy but if I got pasta and I got Pasta too that was like pasta primavera. I would want to kind of understand like that original pasta Well, what was in that versus the pasta primavera? I you you just take a more genuine interest in something that you have to choose That's just psychology one one anytime that you choose something you always are going to be ⁓ yeah ⁓ go ahead James A. Seechurn: Yeah, yeah. to expand your metaphor, it's like when you go to a restaurant, ⁓ you ⁓ know, you've all options, you're more likely to engage with a conversation with the waiter to understand which ⁓ option is you should right? ⁓ Yeah. Robyn Shutak: Exactly. ⁓ 100%. And I think I just want to comment on your original question was how common is it? It is not a common practice. I can name. ⁓ probably 10 companies right now that are doing it, but it is increasing. when you look at surveys, it's not gonna say this is the prevalent practice, but there are a lot of companies out there that are doing it and people are paying attention. And they're paying attention because it's interesting, it's different, and it can be a real competitive differentiator for companies out there. When we all look the same, what's the real reason to go to the next company if you all kind of look and feel the same in terms of compensation or total rewards. And so not the most prevalent practice yet. We're seeing it increasing. I'm a big advocate for it and the biggest thing before in terms of barrier to entry was really that like administrative record keeping part of it and that's sort of being overcome now. So I would like to think we're gonna see more of it especially because my last comment is ⁓ from a total rewards perspective what we are continuously seeing and I don't know if you are as well James but people James A. Seechurn: Hmm. Robyn Shutak: want flexibility, they want personalized experiences, and that is something that would come with your sort of equity compensation and flow over. Are you seeing the same thing or feeling that? James A. Seechurn: Yeah, I just think people want to be treated like adults in general. I think employees are sick of being treated by children and not given options and told what to do and told how to perform and told how to get their work done, where to get their work done, who to get their work done with. And when you really look at the companies that have been successful about getting the most out of their workplaces, they're the companies that have a participative culture, empower people to figure out how to get things done. Robyn Shutak: Yes. James A. Seechurn: Spotify did it by limiting squads to 150 people early on in their existence. Google had 20 % time. The companies that really have innovated always create room for people to figure things out for themselves. Let's get the case study off and mention the SEMCO in Brazil that really had the most participative work culture. And part of that is saying, well, what do you want to earn? Like how much do they actually let employees set their own salaries at one point because they're owners in their own company. True owners, by the way, not 20 % owners, but true owners of the company. So to me, anything that gives employees an actual voice and lets them make decisions for themselves can only ever be a good thing. The problems that come with it are either administrative, which can and should be overcome, I think. or communication and training. But again, if you start giving people the option to your point, people will be invited into the conversation to learn, then they will take the time to figure things out. And Netflix is the example we use, the probably most famous examples of full flexibility, although by the way, Semco did it first in the 80s, but Netflix has done it more recently. They do have deep. training materials for people to understand what they get and what the risks are of one and the other, how you convert a dollar of cash into the equivalent RSUs, into the equivalent options and the risk reward profile for that over time. But it's because you have to, when you start doing that, you force the conversation, you force people to read the menu, to use your restaurant analogy. So I'm a big fan of it. I think we'll see more of it because I think, again, I just think people like to be treated like adults and what's better than being how you want to be paid. Robyn Shutak: It's so true and being treated like a mature adult is a really good way to describe it and quite frankly it really enhances the perceived value of what you are getting in my mind or in my opinion and also from a communications perspective I think if you approach it in such a way for example if you are a couple of things if you are introducing a new equity vehicle say you are only granted stock options and people are familiar with stock options and then you now want to introduce a choice program and you're going to give people the ability to choose RSUs. Well then you go through your journey and you you educate people on their stock options and their equity, this equity 101 on what stock options are, because that is something they're familiar with, so we have a refresh there. But then we have a separate conversation around RSUs, and this is a new form of equity for the company, and what does that actually look like? you sort of take it and... ⁓ James A. Seechurn: Mm. Robyn Shutak: different layers of learning. You bring in the RSUs and then you have a more comprehensive training with the two and how are they different and what that can look like and allow people to do some modeling of trade-offs. What does this mean if I pick more options versus RSUs and you have the ability to model that out as a participant? I think that can make all the difference. And one other component of that is just even the way that you require, many companies require employees to onboard through lots of education, including maybe insider trading requirements, sexual harassment training, all of those things are on. activities that we all have to go through at most of the companies that we work for. Why not make this a part of your learning and development journey and a requirement before you can actually even buy into the program. You have to go through training about what it is and actually what equity is and then you can be much more informed and that just is treating people much more like they are the investors that we want them to be and the owners that we want them to be rather than just passive recipients and I think that's really powerful. James A. Seechurn: Mm-hmm. Yeah, it's so true. And to your point, and this leads us nicely onto the general conversation of ownership and what that means for these companies, because again, we hear this word a lot, ownership, and a lot of leaders, CEOs will say, think like an owner, act like an owner, be an entrepreneur. They'll say that, but then in practice, you don't really get to be an owner act, because if you were an owner, you would do things very, very differently, and you can be sure that owners wouldn't be filling out their own performance management reviews and things like that. They'd be doing whatever they deemed right to get the job done. So we say things like, and then treat, again, treat people like children again by micromanaging their every move. yeah. So we, we, we say people to people, okay, think like an owner, act like an owner. then we, we don't really allow them to behave like owners because owners wouldn't care about their title or care about who they're reporting to, or care about their quarterly performance scorecards, et cetera. But for me, equity is one of these things. So we talk about equity as ownership, but. Well, at least for most VC backed and PLCs, the reality is that employees aren't owners really, are they? Because even if all the employees got together and decided they wanted to do something, they still wouldn't amount to more than 20 % of the voting rights of the company. The true owners are either outside investors, in the case of VC backed companies or the founders or institutional shareholders. And this is something I've been grappling with for a while, this idea of ownership. You can have ownership in a true employee owned company and those do exist. They just tend to be a bit quieter than the ones that make the news. Patagonia, I think, is a great example. But in the public world, yeah, it's a wonderful example of an employee-owned participative work culture. Yeah. So in that scenario, you are an owner. You can think like owner because you actually are an owner. And you have a vote. And all the people around you are also sharing that vote. So you do need to find consensus together. But what I've struggled to reconcile is Robyn Shutak: Right. It is, yes. James A. Seechurn: how do you get people to really be owners when they're not really owners? Yes, they do get a piece of that pie and that does fluctuate in value. there is a value. Robyn Shutak: yeah. ⁓ James A. Seechurn: so this is the problem I've been trying to reconcile. On the one hand, we want employees to think and act like owners, and we should because people that think and act like owners do right by the company, right by their employees. ⁓ want to preserve the working environment that they're part of and you get these wonderful circular behaviors and positivity because people want to protect that and keep it. ⁓ in the typical PLC world and the typical VC backed world, It doesn't really allow employees to become true owners in the current model. And the last thought I'll have on this before I get your perspectives on just maybe in the long term where we can take where this might be able to go in a slightly different direction. But Lewis Kelso is someone I reference a lot because in the 60s he created the ESOP movement. Yeah, which I think is basically the principle was that you can't have people working on something. Robyn Shutak: Yep. James A. Seechurn: and the capital of which then is up in the hands of others, which is exactly what happens right now in PLCs, which I do believe is one of the reasons why you have such widespread disengagement. You've got a group of people working very, very hard. They've got their salaries, but the value they create, the capital they create, ends up in the hands of a few wealthy investors or funds in America. which means that you have this disconnect between the capital that's created and the people that create it. So, Luis Kelso, what he posited is then you have to create a vehicle through which those employees can ultimately become the owners of that entirety of that capital. And we mentioned Patagonia, they have a similar principle as well where the employees become the owners of the capital they create as well. And there many other examples. It's just not that widespread at the moment. So, You know, I just wonder what are your perspectives on that? Is it as much of a problem as I make out? And also, could be a different model of ownership and governance that might help get around that? Robyn Shutak: There's something just really interesting about saying you're an owner in the company and not to take us off track but like the spirit of that is really powerful for people and I understand what you're saying in terms of like but wait maybe this is the outcome and that's not all that favorable but like the idea that we're all rowing in the same boat and we're working towards a mission, that's really powerful. And I think when we own something, we treat it very differently than when we rent something. Imagine renting a car versus owning a car, we treat it much differently. And so I think to kind of go back to your point, equity really does work best when employees both understand that they're... the upside part of it and the uncertainty. And there's a lot of risk to it. We talked about that volatility and that's inherent with any sort of investment vehicle. So it really kind of comes down to that communication and being transparent about equity. so for it to really be meaningful and motivating employees need to understand how it works and how company performance affects the financial stake. And so I think there's ways to overcome that through some of that transparency that is a part of having quarterly briefings, being able to share information around valuation, stock price, funding rounds, things that like a lot of companies don't really want to share and they don't want to be transparent about but I think we can do more of that because that that all hinges on the future of what this means for individuals over time and what it might not mean as well. And so the level of transparency around equity in this space specifically, not the same problem in the public space, but in this space is very different and I don't think we've got it right. And I think there's more opportunity. for us to do a lot more. And that really sort of hinges on communication and all of those trade-offs. James A. Seechurn: there's a gap that can be bridged to some degree through communication, I think. So definitely companies need to do more around communication. So if we think about the VC bet, because in a public company, it's all there. The financials are out there anyway, you're quarterly, you know, reports and things like that. So it's automatically much more visible. companies still need to do something with that. it's there. In the VC backed companies, I do think there's a huge gap. Robyn Shutak: Right. James A. Seechurn: in terms of transparency because of the fear of that information getting out, know, that very sensitive information getting out. ⁓ So there's obviously some practical constraints about, but I also think I'm not sure exactly how you can expect people to care about the mission if they don't know how well the mission is going. So it's like you can, you don't want to be transparent, that's fine, but then don't expect people to act like owners because owners know what's going on. So you want, you can't, don't get to expect people to act like owners when it suits you, but then not treat them like owners when it doesn't for me. Robyn Shutak: Yes. James A. Seechurn: So again, this comes down to being honest about the employee value proposition. If in your employee value proposition, you say, you're an owner of this company, we're going to treat you like an owner. And they say, but we're not going to share the financials with you because that's a secret. But we also want you to care about this product so much. But your CPO is going to know those financials. But you're not because you're not as much of an owner as a CPO. And it's like, well, then I'm not an owner, am I? I'm not. being treated like an owner, I'm just an employee at that point. You can say all these nice words, but the de facto position is I'm essentially an employee with some equity on the side. So yeah, I do think you can use equity and clarity and more transparency to bridge some of that gap. But fundamentally, to me, yes, financially you've got an alignment, but if all your employees still only have 20 % of the company, you still have no decision-making authority. So even if you all decide that you want your company to go in a different direction, you have zero power. That to me is a fundamental breakdown of the ownership mentality. You are, you can never be owners because we've basically engineered our cap table to make sure that's not the case. We have literally gone out of our way to make sure you as employees will never be owners of this company, but we want you to act like owners. That that that's why I just don't think, and I think this happens a lot with the VC back companies. I think founders. executives get frustrated almost that their employees don't care about the company as much as they do. And I just think you can't be surprised about that. They're not owners and they never will be. They have a portion of it, but they can't control the destiny of the company. They might have a voice in it. You might be able to influence your CEO, but the reality is the CEO and institutional investors and outside investments and VC funds. will have the controlling vote into the direction of the company. And that's why this VC backed model has always got this fundamental hardwired problem when it comes to ownership as a concept. Robyn Shutak: I know and I actually it makes me a little sad because I think what you said is it's almost like you have a ticket to participate in the upside but you're not the first in line when the money gets distributed and so you know realistically that is the answer right like you you you're not you're not the first that is going to get paid and ⁓ that can be very demotivating and I don't have a solve for that. I agree with you and I think it's unfortunate. ⁓ We can be the cheerleaders that we can, but the reality is, I think just kind of going back to what you said, ⁓ a lot of companies oversell equity as ownership. James A. Seechurn: Mm-hmm. Robyn Shutak: in this way and then it becomes we don't we're not explaining dilution we're not explaining the payout order and we also don't explain the likelihood of a liquidity event. So therefore people are again trying to make guesses around what this actually means for them and so that really sort of creates those unrealistic expectations and all that confusion that we sort of talked about earlier and filling in the blanks. I don't have a good answer on what the solve is, but I am in agreement that there has to be a better way. James A. Seechurn: Yeah. I mean, again, like it might be that we haven't seen it yet. It might be something on the horizon that does bridge this gap. I mean, there's something I have to say. Yeah, hopefully there is because I began I just don't see it as sustainable the way that the capital is all flowing towards a small group of people while employees. Robyn Shutak: Right. Yeah, that's true. James A. Seechurn: don't get to participate in that upside for the most part. But the ESOP program, for example, has been used in the private equity markets. In some cases, it hasn't been used in the VC back market because VCs are expecting 100x or whatever on their investment. And they're not going to get that by company borrowing money on behalf of employees and then purchasing back shares. Robyn Shutak: and then. you James A. Seechurn: And also the VC backed time horizon is very quick, fast burn. We know that VC backed companies don't survive in any real capacity. It's a very small selection that actually end up going public and staying independent as a company. ⁓ maybe there's something in between. Maybe there's a way to get ⁓ best of that VC backed money. That's speculative, very fast, high value cash wodge but also have a route that allows for employee ownership should the circumstances allow for it. That's what I would like to explore. some kind of exit ramp that involves employees being the one to get the thing that they're building. If the price is right, and maybe there's a sort of provisional agreement, a provisional pool that gets allocated to employees at a certain price, and VCs will accept that maybe they won't get 100X, but maybe they'll get 20X in exchange for selling it to employees rather than going for the IPO. Something like that. I don't know, it could be idealistic, but I'd love that to be a model where these wonderful startups and that wonderful culturally have does actually result in a company then the employees themselves have a chance of owning in the long term. Robyn Shutak: It's very, I like the direction, very philosophical and I think what you said is pretty beautiful in terms of like, yeah, maybe there is something out there that is unknown and we don't know what that answer is. And that's exciting because it hasn't been solved yet and it is really hard for some really great companies out there that have a lot of opportunity and just never go public and they don't have the ability to do any sort of a secondary And so they're stuck. They're stuck. And there's not a good alternative for people to ever realize any value. And then they have cash to do any sort of ⁓ also maybe buyback. ⁓ There's just ⁓ a lot of alternatives. ⁓ And ⁓ that's then you just... ⁓ think as employee of ⁓ a company ⁓ is ⁓ backed, ⁓ James A. Seechurn: Hmm. Robyn Shutak: You just have to get also that communication that is so important that I talk about nonstop. You just need to know that there may not be, there just may not be anything. And by far more opportunities for failure, it's maybe not the right word, but the not. saw this Reddit. conversation on like will I actually ever make money on private company equity and it was like probably not in the most cases no and sometimes yes you know and it was this whole long string of like trying to believe in the dream but if there could be some bridge to that as well of like you just know that this is very high risk and could be a really high reward but probably not James A. Seechurn: Physically. Well, you know, yeah, and I think employees are a lot more savvy. Like, so in the last 10 years, we've had things like blind and fishbowl and Reddit communities, and people are much more willing to talk about this stuff. Robyn Shutak: that's kind of the skeptical side of it as well. Yep. Yep. James A. Seechurn: and learn about what it really means to own equity in a VC-backed company. And it's not difficult to find out the odds. The odds are pretty low if you get VC-backed I'm not sure exactly what that was about. One in 20, I believe, if you get equity at Series A. ⁓ pretty low, ⁓ is why ⁓ talk about equity as this retention. I really want to, especially in the VC-backed world, I really hope people can start getting this notion out of their minds because not only is it not retentive and we see it in the data, people leave very happily and sacrifice the equity. Robyn Shutak: It's, it's low. Yeah. Yep. James A. Seechurn: unvested, just leave it, don't worry about it. But it's got a really perverse incentive to leave. So what I mean by that is that if you are an employee racking up shares in a company that has a one in 20 chance of actually being worth something, Robyn Shutak: Yep. James A. Seechurn: The right course of action is to diversify your own portfolio. by leaving and going to other VC backed companies, which is what a lot of engineers do, you gradually pick up ⁓ in more and more different private companies, ⁓ increasing your odds of actually one of those ⁓ of gold amounting to something. ⁓ got a very, and ⁓ know this and engineers jump around specifically to do this. They'll go and collect shares in different VC backed companies ⁓ that way you do get a chance that it is going to amount to something. It's like buying multiple luxury tickets rather than just hanging onto one. or one with several with the same set of numbers. So it's actually anti-retentive in a weird psychologically perverse way for many people. Robyn Shutak: Yeah. Well, that is absolutely true. And you're right. It's like not putting all your eggs in one basket and being able to like create that portfolio arrangement that is so valuable in terms of your future and what that could look like for you. Another thing, I think just in the spirit of the retentive value at VC back company, it can be really hard to when you've got this really great new hire grant. because effectively you're a new hire grant. You're all in. It's supposed to be your highest retentive opportunity and value. driven opportunity. And that's why we see so few refresh strategies within the private company space until you get really mature. That said, if you're getting options early on and you're with a company for the duration and the company is never going public anytime soon, then you become in a situation where you potentially have options that are going to expire. And maybe you didn't have the money to be able to support the funding for the exercise. becomes a whole other host of problems for both the retentive value of that original equity but also for the company in terms of like how you how you keep those people how do you make them whole that's another really hard thing James A. Seechurn: Mm-hmm. Yeah. And that's the practical problem is that 10-year window, right? Which I think a lot of companies don't worry about when they start awarding, but can very quickly become a problem sooner than you think, right? That 10-year window gets closed pretty quickly. And all of a sudden, you've got a situation where your earliest most valuable people, in theory, on the face of either exercising an option that they can't sell to cover the tax immediately or facing the prospects of losing it. Robyn Shutak: That's right. Yes. it does. Yep. James A. Seechurn: But you do see there are some creative solutions to that, right? So sometimes companies will help fund that tax burden. think we saw Stripe do this a few years ago when they went through a round of funding specifically to cover that cost. Robyn Shutak: That's right. Yep. Yep. In that case though, you do have to have the cash and you have to be much more cash rich to do that and not every company has that and so that can be a barrier as well and not a fun problem to have to solve. James A. Seechurn: Mm. Robyn Shutak: You can also do a secondary, but you have to have the ability to be able to do that in the buy-in, and that doesn't always pan out either. so, what you said, then all of sudden have company or employees coming in that are getting equity that has a much longer runway and maybe more valuable. because effectively the people that were there forever that created the company, their options are going to expire and they don't really have anything that can be done about it. And potentially you could grant them a restricted stock arrangement at the value that they are. ⁓ maybe giving up, but then there's also downstream ramifications there. So it gets really tricky and not to go on a tangent, but it just sort of goes back to like, how do we accomplish the right goals that align with where we are within our. James A. Seechurn: Rem. Robyn Shutak: business life cycle and through ownership. And that's where things just get a little messy and it gets tricky. Maybe there's room for a lot more that we don't know. James A. Seechurn: Yeah. Well, you know, it is interesting, isn't it? Like we've asked it, how do we accomplish our business goals? That's what it comes down to. And if we chart the course of equity, at one point it was used because there wasn't enough cash to pay people. So, you know, it was used to compete in the Bay area specifically, where it is where it all kind of started, the epicenter of the equity room. And the idea was that I think, you know, I was talking to... Robyn Shutak: bring you. James A. Seechurn: Dan Walter about this a few months ago, he pointed out that IBM was the place to be at one point and to get to persuade people not to go to IBM, you couldn't compete with cash, but you could offer equity. So at that point, when IBM dominated the tech landscape, smaller companies would use equity to lure people away and because they didn't have the cash But now they do have the cash, don't Because you see the rounds of funding through VCs. ⁓ they do have the cash and actually the levels of cash are very comparable with public companies. So I guess my question is how important even is equity anymore? Is that has the landscape even changed to the point where it's just not really a big deal? Why don't we just use the cash? Robyn Shutak: Yeah, yeah. It's that like, you're right. If there is cash plentiful, sure. There is that idea though, that dream that I think still carries over from just a rich history and like the pride and ownership that comes through equity that I don't think even if there's cash out there that anybody can argue. It feels really nice and powerful to own equity in a company and it might be all smoke and mirrors maybe when all is said and done if you are cash rich and you can pay people in cash. it's like the American dream. I don't know. I don't think can get away from that. James A. Seechurn: Right, yeah, it does. mean, that's the beautiful thing is it does echo the American dream using equity. I feel sometimes though maybe we... Robyn Shutak: Yeah. James A. Seechurn: There is definitely a cadre of people in a given company, particularly the engineers and the senior, the VPs and above who probably do. But I also think there's quite a lot of people that don't necessarily subscribe to that as well. And to your point about optionalization, it does make you wonder if more VC backed companies should consider offering the choice to people because particularly with rising costs of living and the floor of pay hasn't really kept pace with the cost of living and how much that's increased over last few decades. Robyn Shutak: Right. James A. Seechurn: Particularly with that, I'm sure there's a lot of people that would just say, I'd rather just have a bit more cash if that's an option, please. And it does make me wonder if we should maybe give up on this idea that everyone just should get equity, just maybe just ask people, ⁓ does everyone want equity or would you rather just maybe have a bit more cash and then we can protect our cap table just by not giving as much equity to as many people. Robyn Shutak: It kind of goes back to that conversation we had earlier when we were sort of talking about this idea today is block. are... the company that I was referencing earlier, it's publicly disclosed. They introduced a program last year around choice and they are public, but it was around RSUs and cash. it was in many, many similarities to what you're talking about here. It's like, well, maybe I don't want equity. And if I don't want equity, I can choose cash. And maybe that is something that could bridge into the... the private market space and private companies where you know what if we are cash rich if you want equity you can choose equity but giving people that choice which we just don't I've not perceived to have ⁓ any clients or any sort of reference point of a company that actually has instituted that practice. But I think that model could be very similar anywhere. And it's really around economic empowerment is what their philosophy is. And I really believe in it. And I like it a lot because it really goes back to just what I was saying at the start of this is the notion of not making decisions for people around eligibility because then that becomes a friction point where you say, well, you're not eligible for equity because we can't afford to give you equity. So instead we're gonna give you the option to choose cash or equity. And that is much more adult-like and person-specific. So. James A. Seechurn: Hmm. Robyn Shutak: To your point, I think there's something to that and maybe a way to bridge that gap through that choice that comes with what we've sort of talked about throughout this conversation. James A. Seechurn: Hmm. Yeah, I hope we see more of it. I feel like it's been mooted for a while now, this idea of optionality and choice. And I do think the administrative hurdle is probably the main reason why it's not more commonplace. So it's good to hear that there are solutions that companies could look at. like you say, it's getting harder and harder to differentiate. A great way to do that is just to say you can choose. Robyn Shutak: It is and people pay attention to differentiation. know I do. And here we are, we talked about Netflix, block companies that are kind of creating the way and whether it's the right way or not, whether it's working or not, at least they're doing something different and people will pay attention to different because different is interesting. We talk about it and all the other things just don't always get that visibility that James A. Seechurn: Hmm. Robyn Shutak: we want because they're just the same. Who wants the same? Everybody wants some optionality. James A. Seechurn: Yeah, yeah. Right, and because it's all the same, if you are gonna leave... you just go and get equity elsewhere. You mentioned the big new higher grants, which are all well and good. then that means your best chance of more equity is leaving somewhere else and getting another new big higher grant as well. So the analogy I would use is golden handcuffs are not particularly useful if the company you're going to next gives you a bigger, shinier pair of golden handcuffs in exchange for your old ones. It just doesn't work in that model. Because that equity is table stakes, it is not a differentiating factor anymore. yeah, optionality is one way to differentiate yourself in the market. Robyn Shutak: Absolutely. I couldn't agree. People keep chasing the next thing and maybe the next thing is the more of that optionality rather than just like a higher, a higher new grant or new hire grant somewhere. There's this, this inspired me, this conversation, because I never really sort of thought about like, hey, maybe there's something that we don't even know about yet, which that's cool. That's, that's interesting. James A. Seechurn: Right. Well, yeah. Yeah. Hopefully, there'll be something like... ⁓ You know, the Netflix is, you know, the Netflix is of the world are often the ones to innovate because frankly they can afford to, they're always going to be able to hire no matter what they do. So you get a lot of clients that say things like, what open AI do and what Netflix do and what a Facebook, they can do whatever they feel like they're going to get applications from every direction no matter what they do. So don't necessarily look to those companies as the North star of best practice because they can get away with a lot, but they do tend to be the ones that experiment with new ideas and new concepts, I think. Robyn Shutak: and they get noticed and I reference them all the time for all those reasons. It's just a hard pill to swallow for most companies because nobody really wants to be the first or try something different and it's uncomfortable and for all the reasons that change is uncomfortable. Everybody is always asking what is best practice and I hate that question sometimes because I want it to be about you and what is important to you and your organization, not necessarily about what everybody else is doing. Starting there is just a bad place to be, I think. But I know it's just an inherent behavior of anyone, personality, company-wise. Nobody wants to be the first, but you also don't want to be the last. James A. Seechurn: Well, I had a little rant on LinkedIn the other day about best practice. I hate the expression best practice because it never means best practice. it? It doesn't even mean that it just means average. What you're really asking is. Robyn Shutak: my gosh, yes, I totally, yes, I know and I. James A. Seechurn: Average practice what you want to know is average normal lowest common denominator least likely thing to get me fired practice That's what you're really asking So let's not call it best practice because best practice would be the one you've never heard of yet by definition If it was best you wouldn't have heard about it yet So best practice is the one I'm going to tell you about that you've never heard of before That's that's because the potential be the best but you don't know what best practice is So ⁓ expression itself has always been so flawed in my mind. It drives me nuts when I hear ⁓ talk about best practice ⁓ Robyn Shutak: Yes. I, that's so funny. I did not plan that at all, but I completely remember your post the other day. I loved it and I agree with you completely. I know I commented on it and I swore that I would not say level set in this conversation today because I don't like that either. James A. Seechurn: Right. Right. It's great, you know, when you spend a career hearing these things, it's so difficult not to pick up on those expressions, isn't it? Robyn Shutak: It's so true, but what I'm so glad that we, you know, kind of are ending on this, like this best practice thought, because you're absolutely right. Best practice that should be like the thing that like nobody's doing and it's so interesting and like we all want to do it, but like it's so misconstrued. I guess kind of closing, ⁓ we met ⁓ not long ago, have developed a fast friendship and ⁓ mutual love for all these things, equity compensation, and that was a result of ⁓ book that I read that you published recently. And if you wanna know more about my feelings about the book, you can look at my LinkedIn profile. I did post about it. Fantastic, excellent book. But what are you working on next? Because I can imagine that's the past and the future is the future and you are James and you have lots of ambitions to do more. What's next? James A. Seechurn: Yeah, well, the first thing is an audiobook version of the of what pay costs. So that that hopefully will be ready soon. So that's the first thing I was welcome, but now I'm done with that. So the next thing is the next book I'm working on, ⁓ what was interesting when I published what pay costs, ⁓ I was kind of bracing for the negative reaction because Robyn Shutak: Okay. James A. Seechurn: I'm essentially saying all the stuff that I've been selling. a lot of consultants sell and lot of companies want to do is basically not achieving anything. ⁓ these compensation frameworks, all these salary bands, these merit cycle, these performance reviews, ⁓ bonus mechanisms. It doesn't really achieve anything. that was really the thesis of the book. Is there any evidence to say any of that stuff is helping anything anywhere? And my conclusion is, well, ⁓ sometimes, yeah, with sales roles, you can use and performance and integrate the two and you can create a healthy performance-based culture that's got a healthy internal tension and competition and things. But for the most part, companies want smart, free-thinking, innovative knowledge workers. That's what companies now need the most. to survive in this market given the amount of competition in place and the ubiquity of AI tools. So everyone can be more efficient. That's easy these days, just get more AI tools. But not every company can keep innovating in a way that gets them ahead of their competition. So my philosophy is that if you want to survive, you need to have a innovative, happy, engaged workforce that not only comes up with the ideas that are going to save you, but allows you to hear about them. What you don't want is a group of people that, one, don't bother. And two, when they do have a good idea, don't feel confident or respected enough to share that idea. And there's so many people out there that feel that way. They have great ideas. There's no point sharing it because I'll just get told no or the CEO will just change their mind and do a different direction. That is not a scenario that will create a successful company. to answer your question, my next book is about how to create the conditions for that kind of company to exist. So I'm moving more away from pay. I talk about pay as the foundation to make that happen and what you do need to do with pay to get pay right and to stop people talking about it basically, But it's more about how do you genuinely create the conditions to inspire people to do that work, to allow ideas to flourish, to allow collaboration to happen. ⁓ And fortunately there's plenty of good research material around this, not least self-determination theory ⁓ Deci and Ryan, which has stood the test of time, but you've also got all kinds of other theories around there. but also a lot of real world case studies of companies that have successfully created the conditions for innovation to happen, which I put a few examples on what pay costs. So anyway, this book is more about a guide of how to do that, whether you're an employee on the ground frustrated by your colleagues that doesn't allow you to do that, or if you're a business unit head that wants to do that, or if you're a CEO that wants to create a company that allows that to happen. It's really practically speaking, what can you do? hope is to get that finalized around about June, July time this year, but we'll see. Robyn Shutak: I love that spirit and I think that a big component of that is just transparency, transparency, transparency and sharing information so that people feel that they have a voice and that they can come to the table and react to the things that they hear and especially transparency around financials. That's to me a big ⁓ James A. Seechurn: Hmm. Robyn Shutak: area of opportunity for people to understand the financials of an organization and what that actually means. We are in a world where I think there are a lot of employees who are not financially savvy and just basic education around how we make money and how we can be successful together empowers people to be more engaged and feel comfortable to talk about things within the organization. So maybe that'll be a component of it. I know I've offered to potentially, ⁓ perfect, perfect. And I want to be a part of your journey because I think what you're advocating for is really important and we should all feel like we have a voice. James A. Seechurn: ⁓ it is. Yeah. Robyn Shutak: This is... really kind of random, but it goes back to your original book that I recently read over the holidays. And I thought one thing that was so interesting, so interesting, and I'll leave you all with this because you need to read the book, but you talk so much about the whole exercise that goes into the performance review process and all the things that make it super mechanical and operational within an organization and takes months and months and all the time involved. to go through this exercise and then employees get a 2 % or a 3 % increase and what you're conveying is so. deflating, but what you're doing leading up to it, up to that point, makes it seem like this is such a worthwhile and important exercise, but the outcome is so, it falls so flat in so many cases. And so that really stuck with me and I think people need to read the book to get more around your thought process there. It's flawed, that is flawed. James A. Seechurn: It is, it just, it just becomes so common. Everyone assumes it's the right way to do things. And there's also this underlying assumption that is interesting. did a debate recently around pay for performance. A lot of it comes down to the underlying assumption that every individual needs to be rewarded for their individual effort. Um, which is a coached state of mind, I would argue. Um, I think corporate America has done that. the education system has done that. We've been told that we should. Robyn Shutak: you James A. Seechurn: But there's two problems. First of all, you can't because it's a collaborative work environment. You don't know what everyone's individual contribution is. And the data shows that you can't judge that on a fair basis. And then the question that becomes, well, should you? Should you even try and do that? Should you want to even do that? Or is that just a state of mind that we've been told that we should care about? And I would argue that that all comes from 90s Jack Welch style curve thinking. which was designed to extract as much effort from people, get people competing with each other so much that you get more and more output from people. Whereas in reality, they're all competing for the same set of resources. So it never really benefited people to do that. It benefited their because got people fighting over this small amount of finite resource for, you know, this merit budget, which never really amounts to anything anyway. But I don't think it's ever really been in service of better work. And again, the research supports me on this. Better work happens when people aren't fighting for rewards. It happens when people share the rewards. Yes, some people work harder than others and some people, yeah, there is a bit of that. The question is what degree do you need to reflect that? And I would argue you'd reflect it in career opportunity, but you don't need to be that atomized to care about merit cycle and whether someone gets 2 % or 3 % or 4%. That's not serving anybody. That's really like, where are you on that spectrum of individual rewards? You really feel the need to fine tune it. And then where do we stop? What about every week? What about every day? What about every hour? How far down that individual mentality do you need to go before people are fairly rewarded? And I would say we're way too far down that side of it. We need to be back up. We need to back up a lot more to both what we can do and what we should do based on what the data tells us about how humans produce their best work. Robyn Shutak: I think it goes to the first thing that you said when I was speaking about this point is we've always done it this way or it's been done this way so we continue to do it this way and it kind of goes back to the topic of best practice. James A. Seechurn: Right. Robyn Shutak: I understand your feelings on best practice, but it is a general practice out there that we've always done it this way. So we're gonna continue to do it this way, but we've gotta get uncomfortable with being uncomfortable and doing things differently. And the companies that do get noticed. James A. Seechurn: They do. Yeah. And a lot of companies do this kind of thing already. They just tend to be small startups. again, if everyone, you take a group of owners in a company, they don't have any of this stuff. They don't have performance management, don't have merit cycles, don't have bonuses, have any of that stuff. Because they actually are owners thinking like owners and lo and behold, they act like owners, right? But it's when they grow a little bit, then they kind of assume that they need to change this model and adopt all these legacy models and you bring in a... Robyn Shutak: true. Right? Totally. right. James A. Seechurn: VP or a manager that had this system at that other company. So they bring that in and bring it with them and say, worked out. It's going to work here. We need performance management. And, you know, a guy I spoke with ⁓ in the podcast got released last week, Luke O'Mahoney who made the point that they're bringing a predetermined solution rather than establishing the problem and then finding a solution to that problem. The problem is how do you get the most out of people? ⁓ And answer to that is you make sure they're engaged. It's not. dangle carrots in front of them. That doesn't work. That doesn't help people become better problem solvers. So the question is, what problem are you trying to solve? And then this kind of product led problem-based mentality is what I would advise every company to think about, not assume that that prepackaged solution of performance management is the right thing. Think about what problem are you trying to solve when you're introducing that? Is there even a problem that needs to be solved? And if there is, what does the research say is the best way to do them? Robyn Shutak: And that's, I think the biggest point is, is what is the problem we need to solve and backing into it in that way and approaching it in a different lens, 100%, 100%. It's fascinating, it's in your book, a lot of it, and it's really great. And I'm excited to hear that that is going to be in audio form. How... James A. Seechurn: Yeah. Robyn Shutak: Wonderful is that, so make it really easy for people to listen to as they're driving in their vehicle to their work where they should have choice whether they get to work there or not. I believe in that. But that's another story as you and I both are working from home, right? James A. Seechurn: Yeah. Right? Yeah. Right, exactly, because we like to have the ⁓ we can't start talking about remote work and return to office or be here for another round, but maybe that's a topic for another conversation because that whole thing drives me nuts. Yeah, but let's wrap it up there, but we should chat again. So I'll wrap up by saying just thanks so much for your time. You've got so much experience in this industry. know you're doing... Robyn Shutak: We like to have a choice. Right, this is true. This is true. Absolutely. Okay. Yep. James A. Seechurn: wonderful things at Infinite Equity to improve the way equity gets used and start solving some of these problems. And so I'm glad to hear that you and Infinite Equity are doing very well in this space. Robyn Shutak: Thank you so much. I'm so happy to have this conversation. It's been a pleasure getting to know you over the course of the last several months. And yes, we, I think, believe very heavily in the power of what equity can do for companies. We want employees to be owners of the companies they work for and really want to help figure out the way to accomplish that. that is our mission. And we're going to continue down that path until... until somebody tells us otherwise. James A. Seechurn: Hopefully that's not for a while. But yeah, Robin, thanks so much for your time. It's been an insightful conversation and we'll speak again soon. Robyn Shutak: Yeah, wonderful. Thank you. Thank you, James. James A. Seechurn: Okay, thank you. Okay, bye.