Episode 34 | Preparing to Take Advantage of Equity and Stock Compensation at the Big League Levels with Joe Forish

Joe Forish  00:00

In terms of tips, I would tell everyone to develop a strategy before receiving the shares, whether they’re, it’s very small or very big, because a lot of times what happens is that people get a lot of shares in their employer, and they have a large chunk of money. And that can be dangerous. And I do have a lot of sad stories around this unfortunately.

Voiceover  00:27

Welcome to the “Lead at the Top of Your Game” podcast, where we equip you to more effectively lead your seat at any employer, business, or industry in which you choose to play. Each week, we help you sharpen your leadership acumen by cracking open the playbooks of dynamic leaders who are doing big things in their professional endeavors. And now, your host, leadership tactics, and organizational development expert, Karan Ferrell-Rhodes.

Karan Rhodes  01:03

Hey there superstars, this is Karan and welcome to today’s episode. You know, I still remember when I got my first sign on bonus and performance bonus at work. This was very early on in my career. And I was on cloud nine and thought I was the bomb.com. But then, you know, as I rose up through the corporate ranks into higher level executive positions, I started to get equity compensation as part of my compensation package, you know, like stock options, restricted stock units, and performance share units. And I was embarrassed at the time that I didn’t know as much as I should, about this piece of my employment agreement. You know, my parents, you know, they were very financially savvy, but they were educators, and they weren’t as knowledgeable about the compensation options in corporate America. They just didn’t know how to advise me. And so I had to cram knowledge very quickly and reach out to my mentors about how to best negotiate my awards year over year. And quite frankly, my lack of knowledge probably left some money on the table, and I still kick myself about this to this day. Well, hopefully, you won’t have to experience what I did, because on today’s show, I’m extremely honored to have Joe Forish is the founder of Fortrove partners, which is a company committed to helping founders and employees with equity ownership, how to best optimize their offerings. And he helps also relieve the stress and uncertainty around finances when you’re negotiating at this level. So if you better want to understand the upper echelons of financial compensation, then this is the episode for you. And I always tell my mentees, “If you stay ready, you don’t have to get ready.” So be ready to get this knowledge that Joe is sharing with us. And also be sure to stay tuned for just two minutes after this episode to listen to my closing segment called Karan’s Take, where I share a tip on how to use insights from today’s episode to further sharpen your leadership acumen. And now, enjoy the show. Hello, superstars. This is Karan. And thanks again for joining us for another episode of the Lead at the Top of Your Game Podcast. I am extremely pleased to have our guest today. His name is Joe Forish. And he’s the founder of Fortrove partners, which is a company really committed to helping tech founders and tech employees with navigating the whole beast of equity ownership and companies and he’s going to pull back the layers of the onion to help us better understand that a bit. But welcome to the podcast jazz.

Joe Forish  04:06

Hi, Karen, thank you so much for having me.

Karan Rhodes  04:09

I am just over the moon to have you. And this is such a great topic for our listeners. Because as you know, a lot of people in leadership, they’re leaders in corporations, but then they’re also, you know, leaders in the entrepreneurial space as well. And they usually people go in and out of those professions. And at some point a lot because of course, people are very enterprising. And a lot of people are having to think more deeply about, you know, equity compensation. What does that mean? How do we navigate through that, especially when it wasn’t part of their life for 100% of their lives. So we’re super happy to have you on the show.

Joe Forish  04:55

I’m really excited to be here and I look forward to chatting with you and hopefully enlightening your listeners,

Karan Rhodes  05:01

absolutely, I have no doubt that you will know before we dive deep in that, for as much as you feel comfortable, I’d love for you to share just a little bit about yourself personally to our audience,

Joe Forish  05:11

That would be wonderful. I grew up in a small town in Pennsylvania in the northeast part of the state. For those of you who are familiar, it’s called the Poconos, small town. 2000 people, one traffic light at the main corner. And I was lucky in a lot of ways, because I had really good parents, my father was and still is a mechanic. My mother was a school teacher, now retired. And it really felt that the base and the foundation they gave me was really good in terms of putting in hard work, being rewarded and, and going from there. And that’s helped me a lot throughout my life. On the other hand, growing up in a small town had a lot of advantages, because everyone knew everyone, everyone talks about each other, whether it was for better or for worse, r

Karan Rhodes  06:00

Right.

Joe Forish  06:01

But a lot of that really helps everyone accountable to each other, because no one would want to be talked about in a bad way, or forgot to forgive be shamed by the town for doing something that they should have probably done. So I really think that both of those formation habits really helped me a lot in life. And I went to Penn State studied finance, I graduated there with top honors, and throughout my professional career worked in investment banking, and private equity, followed by a hedge funds. Then I went back to school at Harvard for a graduate program, and along the way, got my CFA and my CFP, but it wouldn’t have really been possible if it wasn’t for the foundation that I learned in that town, and especially from the drive and responsibility that my parents taught me.

Karan Rhodes  06:52

Yeah. Wow, that’s amazing. They sound like fantastic parents. And listeners, when I got a chance to do a little pre meeting with Joe, a meet and greet. That was what something we had in common, both coming from smaller towns, kind of that down home values, you know, but it created, similar to my parents being very supportive, it created a great foundation, when, you know, went out into the world. So love that. And Joe, share a little bit about because you know, you got your start in, in the whole world of finance and private equity. What made you want to double down in this particular niche in your own firm? Like, what was it that really opened your eyes and said, you know, a lot of people meet my counseling on this?

Joe Forish  07:44

Well, given that I studied finance, I worked in finance for a long time, I would always get questions from family members, when I would go home or friends I had in New York, or wherever I was about, “Hey, I have this, what do I do with it? Or I have that? What do you think about it?” So I got all these questions along the way. And also, in terms of my formation and journey in life, most of the work I did was heavy analytical, it was a lot of reading annual reports, putting numbers in spreadsheets, and really trying to understand businesses. And it wasn’t as heavy on the people interaction, it was a little bit but not as much as I liked. And as I went through my career, I realized that, one, I could really help people because everyone’s asking me all these questions all the time, and two, I do have this natural propensity to not only want to talk with others, but really want to help and put people in a frame of mind or a financial state, that they can really align their values of their lives to what they’re doing with their lives financially.

Karan Rhodes  08:47

Nice. So what are some of the things that people struggle with our tech companies or tech employees founders? Because as you’re right, that’s the big industry. That is, I mean, there are other industries that have equity compensation, obviously, but those are known for, you know, having some really interesting and different offerings. What is some of the things that you find that people struggle with and in the tech arena when it comes to equity compensation?

Joe Forish  09:19

There are quite a few areas, unfortunately, I would say the first part is the type of equity compensation or stock compensation. There’s different kinds of stock options. There’s things like RSUs, which stands for Restricted Stock Options, and there’s also performance share units. So these vary by employer. And I really think where people struggle is understanding what they really own. So I think the way to go about that is for the person to read their grant agreement, grant document that they receive when they get for example in RSU, and really try to understand what it is is and how it works.

Karan Rhodes  10:01

And do that, is this something that can be negotiated? Or is this something that’s just awarded?

Joe Forish  10:06

It can be negotiated. Sometimes, again, it depends on the employer. But usually there is some wiggle room in the negotiation for these equity, stock ownership instruments. And then outside of your the different types that exist. There’s also the headache of taxes around each of the different types. And stock options are taxed differently than our shoes versus PSU is performance or unit. So that adds another wrinkle of complexity into people’s lives

Karan Rhodes  10:38

Are the performance share units because I’m learning with right along with the listeners are performance share units, the same as phantom units, is that terminology the same?

Joe Forish  10:48

It’s mixed, depending on the company, but in terms of the performance share, a lot of times it depends on Okay, let’s say you work in the marketing group at company ABC, and the sales goal was $100 million for the quarter. And you make it. There’s a performance share that will be granted to the employee in the marketing department because they’ve reached the goal for that quarter. So they’re essentially given more more pay, but in the form of the share ownership, whether it’s another 5000 shares, 10,000 shares, etc. It’s for the employees and the unit’s performance because they’ve done a good job in that time period.

Karan Rhodes  11:28

Great explanation on that. And what are some tips like I love for our listeners, if they find themselves in this situation of being awarded? These what are some tips you would give them on how to think about that compensation?

Joe Forish  11:44

Yes, in terms of tips, I would tell everyone to develop a strategy before receiving the shares, whether there, it’s very small or very big, because a lot of times what happens is that people get a lot of shares in their employer, and they have a large chunk of money. And that can be dangerous. Yeah. And I do have a lot of sad stories around this, unfortunately,

Karan Rhodes  12:10

Share one if you don’t mind. And you can leave out the names that keep them innocent.

Joe Forish  12:14

We can use a code name if you want, we’ll call him Harry,

Karan Rhodes  12:18

Okay. (Laughs).

Joe Forish  12:19

And Harry works at a company where he had a lot of our issues. And the stock price is going up and up and up. And every quarter, he’d get more and more stock. And he had a very large chunk of money sitting in the company stock. And he told himself that he was going to wait until the shares went to $80. They got they got to $78. But he was it’s called anchoring, he was anchored on the $80 share price. Sadly, for him, the shares never went to $80. And they went down to $4 per share. And they’re Yeah, they’re around there now. And he still owns all of the RSUs that he owned at $78. And he lost, I would say around $800,000, just on paper by not by not selling by waiting for that $2 increment from the $78 to the $80

Karan Rhodes  13:10

Right.

Joe Forish  13:11

That was very dangerous and very painful for him. So I think taking a step back for him or anyone out there, it would be great to have a plan that’s not geared toward the stock price, but geared more towards your ownership or what you want the ownership to do. So if ownership is getting more than 5% of your overall portfolio, that’s a very concentrated position. That’s one way to think about it. And then secondly, when the shares are being granted, the money in your portfolio keeps on going up and up and up. I think what a lot of people, they get stuck on it going up and up and up forever. And I think what you need to realize is that, okay, I want to buy an apartment, or I want to pay down some student loans or whatever the case is, and sell off some of those shares, and use that to really help someone in their financial lives as opposed to hoping it goes all the way to the moon and everything’s gonna be awesome. Right?

Karan Rhodes  14:09

Right. So they’ll be the next trillionaire. Right.

Joe Forish  14:12

Exactly. I think being grounded and having some decent expectations around this would be beneficial because for Harry, he could have your pay down the mortgage on his home or put more money into his college, college education fund for his children, etc. There’s so many things that vary by the person and what they want to do with their money. But I really see it as a vehicle and a way for people to really make the best of it. And unfortunately, sometimes people don’t

Karan Rhodes  14:41

Yeah, no, you’re right. So tell me more about Fortrove Partners, your firm and what do you all offer to your clients?

Joe Forish  14:50

I’m the founder of Fortrove Partners. I started it about two years ago. And I offer financial planning. So that’s the full realm of have everything under the under the umbrella. So obviously, stock compensation is part of that. But investing is only a very small sliver of someone’s overall financial plan. There are things like retirement planning, for example, is another another silo. And then there are things around just having your financial life in order that the documentation in terms of if there’s guardianship for your children, or if you have the right paperwork filled out if something were to happen to you, where the money will go. And a lot of people overlook that. And it’s a very simple thing to do, and very, very stress free, and it will unburden those people if something were to happen to you. So that’s one another piece. And then also things around risk around, like risk planning, okay, like what type of insurance you have, if you own a car or you own a home, like, are you adequately insured for what’s going on in your life. And then there are other pieces where you can get into, you know trusts and estates and how that is set up for clients, and then how everything really fits together, because there is a retirement portfolio, whether it’s in a 401 K, or an IRA, for example. And then there is the stock compensation, which is different because it’s in a different account. It’s not geared in a way that it’s for retirement, it could be, but having someone really understand the global picture, the overall picture of where their portfolio is, where their exposure is, and help them understand that. Okay, if you want to make these goals reach these financial goals, maybe you don’t need to take on all that risk. Maybe you’re just fine. You’re down here, as opposed to all the way up here.

Karan Rhodes  16:42

To the top, yeah.

Joe Forish  16:43

Yeah. So it’s an overall, essentially a financial health check in the beginning, and an ongoing financial health check as things change, for example, markets have changed quite a bit in the past year.

Karan Rhodes  16:56

Yes

Joe Forish  16:57

Interest rates are a lot higher. The tax code always changes the the current tax code will sunset and 2025. So there’s always things changing in the overall picture, and also in people’s personal lives. So it’s a way to just go about and have a sound, financial life and a sound plan for where someone is where they want to be in three years, five years, 10 years, even longer.

Karan Rhodes  17:22

So your firm helps take a look end-to-end look, if you will, overall on everyone’s financial picture. And then kind of based on their desires, their goals for the future, kind of advise on some next steps or things they should think about as they tweak their portfolios, correct?

Joe Forish  17:41

Yeah. And I think a lot of it is around working with an arbitrary third person or third party. So if you ever learned anything, like if you learn how to play poker, or learn how to hit a tennis ball, or whatever the case is, there was probably a coach or someone who taught you gave you some advice. And it was usually ongoing, it wasn’t just a one time thing, like, Hey, I’m gonna go, I’m gonna go for one tennis lesson. And I’m gonna go play in the US Open in 10 years, right? It’s an ongoing thing. There’s constant feedback. And I think it’s important to really be diligent around that and work with someone on that, because financials and finances are a big key part of someone’s livelihood.

Karan Rhodes  18:24

And do you find that your clients in that the tech industry, are they very forward thinking as it relates to their financial situation and mix of investments? Or do you think it’s not a really a second thought until they’re actually like awarded, you know, equity grants, or…

Joe Forish  18:46

A lot of that depends on the person, I think it varies on both extremes. And then there’s people who are all the way the middle. Some people don’t even want to think about it, whether it’s for the better or for the worse. And some people are very, very Intuit, they’re very, they understand it, they want to know how to get better. And sometimes they could use some help with that, or around just that the tax timing and the tax planning around these things, because it can get complicated. But yeah, it’s hard to give you an answer like that would apply to everyone. It really depends on the person and taking a step back on this if I can, a lot of that depends on the person and where they grew up and how they grew up. You know, for example, we grew up in small towns. So coming from a small town, there’s a different mentality around money that absolutely, if you grew up in a big city, for example, there’s a different field different vibe, a different association, relationship with you know, this green, this green object that we think about, right, right. And then a lot of it depends on on your family, not just your parents but and some calls cousins, grandparents, whomever and what they went through, as another example, your grandparents or parents who lived through the Great Depression and who back in the 20s And 30s have a very, very different viewpoint on investing. And banks, for example, because they went through a very hard time.

Karan Rhodes  20:12

Absolutely. You’re so right with that. And, you know, so my firm Shockingly Different Leadership, we have a whole division, as you know, that supports private equity backed companies. And we do, but we are focused on the people side of any type of integration or realignment or support, versus where you know, where you go deep on the equity side. But I will say that those firms that are in the heart of, I’d say, VC country like Silicon Valley, and New York and Austin, you know, where their tech hubs, they seem to be a bit more astute than firms that are acquired by private equity firms that had never been in that environment. There’s a lot of education, on equity and the grant side of things for those who’ve never dealt with private equity companies, or, you know, the whole, there’s some groups of people that had never been exposed to this. And so it was an education that we had to help the employees understand, you know, what were the grants and what you should do with them, and how to think about them, you know, those types of things. While it was just a no brainer, if you, you know, were on the West Coast, in Palo Alto, and then in places there, they knew instantly, what that meant, and how to think about it. They’re a bit more savvy. So I’ll just say that’s been our firm’s personal experience with them. But I, as you mentioned, no, there’s no one size fits all, as far as knowledge and preference, right? It depends upon the person depth. So being a founder, yourself of a firm in a very niche firm, if you will, how do you think about being the best leader you can be in your firm?

Joe Forish  21:59

Really, particularly with my time and reallocate the things that I do and when I do them, and I really think about the idea of being ruthless with my time, because I’m doing everything at the firm, and I need to have specific time blocks for certain tasks that certain parts of the day, so I could actually focus and get a lot of work done, not just for the benefit of my business and growing it, but more so for the benefit of my clients. So they’re getting the best service possible. And the best part of me when we speak, and when we interact,

Karan Rhodes  22:30

I love that. Have you always been ruthless with your time? Or have you had to learn that when you found at your firm?

Joe Forish  22:35

I’ve had to learn that I would say it working, where he is an investment banking analysts, I would say being ruthless with time was different concept. Because the hours that were long, you know, 80, 90, 100 hour weeks, so it was time, but I wouldn’t call it ruthless from that education and experience. So it’s quite different from what what I’ve been used to. But it’s actually really exciting because I get to structure my day, my week, my month, like quarter year, etc. Exactly how I want to and really do it for the benefit of those who I’m working with.

Karan Rhodes  23:09

I love that, love that. And what some, what’s your area of focus right now? What’s on debt for Fortrove Partners? Is it to continue to do more of your consulting? Or do you have any, you know, big events or things, you’re going to be books or trainings that you’re going to be rolling out this year?

Joe Forish  23:31

Yeah, I’m actually been guesting a lot of podcasts, which has been helpful with getting my name out there and getting some recognition. I will be hosting a webinar later this month, that to go through some financial planning basics with some individuals. And I will continue doing that as the year goes and keep growing the business and going from there.

Karan Rhodes  23:50

Wonderful. Well, we will definitely have links to how to get in touch with Joe, everyone. So if you’re in the market for a financial planner to help you think holistically about some of your financial goals, Joe is very friendly, as you can tell, but very no nonsense, meet you where you are a kind of guy, I can attest to that. And he’s definitely one you want to have, you know, in your network. So definitely do do check him out. But before we go Joe, you know, I always love to ask my guest, which of the leadership tactics that I write about in my book really resonated for them, and you were so kind to share that leading with intellectual horsepower was really powerful. And for the listeners. As a reminder, intellectual horsepower is about using your areas of expertise to like peek around corners and pick up on trends and things that others may miss are bringing additional ideas to the table. So why did intellectual horsepower jump out for you Joe?

Joe Forish  24:57

I felt like intellectual horsepower is always In a part of my life, clearly the horsepower analogy goes well with growing up with my father who was a mechanic. We spent many a Saturday rebuilding a big block Ford engine. So this is from a different era, the 60s muscles, cars of the era. So for any engine heads out there, I remember rebuilding the 390 cubic inch,  the 406 cubic inch, and of course, the 427 cubic inch, which was one of the finest American production engines ever made for those listening. So that was really, really insightful for me to learn about that kind of stuff. But then on the other side, in our small town I mentioned it was one traffic light on the main corner, there was a shoe store, run by the the Mr. Klein and Mr. Klein was a very nice man. And his father had actually opened the store many, many years before him. And one day we’re in there getting shoes, and I was asking him, like, how do you run your business? How are you so successful? You’ve been doing it for a long time, it’s been in the family. And he gave me a really sound piece of advice. And he said that the only thing you need to do to be successful in business is to worry about the pennies, and the dollars will add up.

Karan Rhodes  26:08

Oh, love that. Just worry about the pennies and the dollars add up.

Joe Forish  26:13

Yeah! And then he was essentially talking about compounding of interest of money. I went to the bank, the next day open a bank account was getting my interest statements every month to see how much money I was making. So I felt that learning about engines and sourcing Mr. Klein that throughout my life, I’ve always felt that reading and understanding and connecting the dots, not just for my own benefit, but for the benefit of others is a great way to go through life.

Karan Rhodes  26:40

It absolutely is. It absolutely is. Thank you so much for sharing that story. And before we close is there one last piece of advice that you would love to give our listeners it can be in the world of finance, it can be the world of life, just any final piece of advice for them to think about.

Joe Forish  26:59

I would echo the advice of Mr. Klein, and really encourage people to save because it’s a very, very powerful mechanism in finance, much more so than your chasing returns or the latest investment trend.

Karan Rhodes  27:12

Oh, I love that. And that’s what I tried to instill in my family as well. So I wanted to do a virtual high five with you that that’s what my parents taught me. And then I’ve been trying to pass that on to the next generation as well. So we’re kindred spirits trying to do that. Well, thank you so much for your time. Joe, you have been absolutely fabulous. Lots of great insight and information for our audience. And audience, you will definitely should be able to check out the show notes when this airs, because some great information and links on how to find Joe will be there as well. So thanks again, Joe, for their your time.

Joe Forish  27:53

Thank you for having me, Karen.

Karan Rhodes  27:55

You’re so welcome.

Joe Forish  27:57

I had so much fun. Thank you so much. I’ll chat with you soon.

Karan Rhodes  28:00

Sounds good. Take care. Well, I hope you enjoyed our conversation today with Joe Forsch, founder of Fortrove Partners. Links to his bio is entry to our leadership playbook. And additional resources can be found in the shownotes both on your favorite podcast platform of choice and on the web at www.leadyourgamepodcast.com. And now for Karen’s take on today’s topic of equity compensation. Now I’m going to keep it real with you. Please please, please, consult a lawyer or expert in your industry before you begin negotiating equity compensation. I can give you a ton of tips and lessons learned by myself as I went through it in my career, but to be honest with you, every industry and situation is very nuanced and you should never go at this alone. So my advice to you is to contact your CPA or tax expert to better understand your options and the implications of your decision on a local, state, and federal levels. Remember, equity is not free cash. And in most cases, the odds are not as good as you may think for a humongous payday. Understand the terms and conditions of the kind of shares you’re being proposed to be given and have the courage to counter offer if it’s not been like a good deal to you. You may want to shift a bit more of your percentage of your compensation more in the direction of guaranteed comp versus variable comp or not, you know, based on your knowledge of your industry and the potential success strategy of your employer. At the end of the day everyone, make sure that you’re making the right decision for you and your family at this stage of your career. If you need a thought partner, feel free to reach out to me and my team at www.shockinglydifferent.com and we’ll give you a head start on your strategy and what to think about. And please everyone, if you’re listening to this episode, now there’s only one thing that I asked of you invest to subscribe, like, and review the podcast and to share with just one friend, because it is our sincere hope that we expand our reach to help more people late at the top of their game. Thank you so much for the bottom, my heart for tuning in. And we’ll see you next week. Take care. And that’s our show for today. Thank you for listening to the lead at the top of your game podcast, where we help you lead your seat at any employer, business, or industry in which you choose to play. You can check out the show notes, additional episodes, and bonus resources, and also submit guest recommendations on our website at leadyourgamepodcast.com. You can follow me on Twitter, Facebook, Instagram, and LinkedIn by searching for the name Karan Rhodes with Karan being spelled K a r a n. And if you like the show, the greatest gift you can give would be to subscribe and leave a rating on your podcast platform of choice. This podcast has been a production of Shockingly Different Leadership, a global consultancy which helps organizations execute their people, talent development, and organizational effectiveness initiatives on an on-demand, project, or contract basis. Huge thanks to our production and editing team for a job well done. Goodbye for now.