Navigating Pay Transparency with Petri Sallinen

In this episode, we’re joined by Petri Sallinen, a seasoned leader in Total Rewards and Equal Pay, with extensive experience in both global organizations and consultancy. Together, we explore the transformative impact of pay transparency, from its role in shaping organizational culture to its implications for equity compensation and share plans across regions. Petri shares his insights on why transparency is poised to become one of the most significant shifts in our careers and what businesses need to know to stay ahead. Tune in for a conversation packed with actionable strategies and thought-provoking ideas!

For more information
Check our website: https://www.optioincentives.com/stock-n-roll
Follow Optio on LinkedIn: https://www.linkedin.com/company/optio-incentives
Read the blog: https://www.optioincentives.com/resource-hub/pay-transparency-biggest-shift-in-rewards

Join Stock 'N Roll with Christoffer Herheim, CEO and co-founder of Optio, as we break down what works—and what doesn’t—in equity compensation, with insights you can act on.

Chapters

• 0:00 Introduction to Stock and Roll Podcast
• 0:19 Meet Petri Salonen: Expert in Global Compensation
• 1:31 The Impact of Pay Transparency
• 2:25 Defining Pay Transparency
• 4:30 Cultural and Structural Aspects of Pay Transparency
• 7:41 Cultural and Structural Aspects of Pay Transparency
• 9:37 Challenges and Strategies for Global Companies
• 10:54 Steps to Implement Pay Transparency
• 16:11 Company Size and Pay Transparency
• 30:51 Future of Pay Transparency
• 33:11 Conclusion and Final Thoughts

Transcript

  Hello, and welcome to Stock and Roll, the podcast where we dive deep into the world of equity compensation. In this episode, we're joined by Petri Salonen, a seasoned advisor in global compensation programs and rewards. Together, we explore the transformative impact of pay transparency on equity compensation and share plans across regions. 

Let's tune in for a conversation packed with actionable strategies, along with geographic and cultural nuances. 

Then we're here, another podcast. Today we have Petri joining us.  It's a pleasure, uh, looking forward to picking your brain and think that listeners will, will kind of get a lot of insights in today's topic. But first, would you like to, um, introduce yourself a bit perhaps?  Thank you. Thanks for the invitation.

Um, I've been working in rewards for more than 20 years. Um, both within companies, leading the function of, of rewards, but also as a consultant, helping clients to, to  overcome some challenges and complexities on.  One reward matters, uh, all the way from, from the crown to the Committee work and the decision making and general meetings and all that. 

I have really enjoyed  and personally, I believe that pay transparency is the biggest change that I will see in my career and during my career, uh, it will change the world of, of, uh, employees. It will change the world of candidates who are looking for a new job,  but it also will change, um, Definitely how companies operate, how they position themselves, and they will also change how investors and shareholders see the world.

Compensation matters and how transparent companies are. 100 percent agree. I think that's, um, I think it's a, it's an important topic that everyone within the field, either you, uh, work in like a company or an issue or if you are, um, a part of a vendor that do these or so you need to. At least have a strong, um, feeling on what's the most important topics here.

So, but yeah, that, that brings us directly into the topic. So would you, if we start off with, with like in your eyes, what is actually pay transparency? It's because, because everyone like it's a, it's a, it's a word that is quite self explanatory, but still, what, what do you kind of, what do you put into it?

And at the same time, it's very loaded. Yeah. Word. It is. Very subjective. Yeah.  So. If I start a bit further, I see compensate as an interesting topic because it's basically how we  grow the business, how we reward employees, managers, directors. But it's also how we appreciate someone's efforts.  It's about bit of, uh,  sometimes a bit of politics.

This is a making authority. So it's an interesting topic that kind of evolves many aspects. It's not just one way decisions and so forth. So, you know, in the same way, pay transparency is also, uh, quite broad, as you mentioned. Um, at the same time, if I try to simplify it.  If you, if you have two companies and you ask from employees that  how do you feel about your pay? 

Most of us, we say that, okay, I should be earning more.  But if you ask from companies that, you know, or actually employees, sorry. If you ask from employees,  do you know  how your compensation incentives, long term incentives are defined? What drives, how you can affect? There's a big change, how you position and understand yourself.

So. Uh, and understand the compensation. So to me, it's about how clear companies are explaining  how compensation is defined, how you can affect what are the next, uh, opportunities to work with  in a simple, simple way. Yeah. So you, so it's just as much like kind of defining a good structure on what you have and what it takes to potentially get to the next levels.

And so. It's just as much doing that as like, okay, being transparent on what are the levels between each other and how much do others earn, right? It's more, more of, of, of the structure. Exactly. Yeah. And then quite a lot of companies, they focusing on technicalities, which is important, but I see pay transparency also a big cultural change. 

How we talk,  how we explain, and how we appreciate our employees.  Very closely related to like career development and a clear path of just kind of growing. And this is like a bit more related to the pay part of it, but yeah.  So in terms of, uh, transparency and structure on these things, do you feel that it's possible to be, to be too transparent or too structured or, or kind of any, uh, because now obviously it comes a movement in and these things are higher on the agenda to many, can it be too much? 

Um,  to me.  It is how we build up things.  So if you're not clear, what is the ambition level, what you're trying to achieve  and how you will approach, you have some kind of idea how to get there. And maybe this is the big obstacle within the companies that it's a bit, uh, complex, it's a bit afraid, you know, people, you know, companies are a bit afraid how to approach this. 

So in order to be transparent, there are companies who are very extremely open and they basically have a list of everyone's salary somewhere when you enter the office and how much equity everyone has and so forth. Yeah. And there might be, you know, perfect cultural fit in some of the companies. But if you start from that, without having a culture  of openly discussing and also, um, you know, actually have a culture doing that  based on my experience, it's, it's really good to consider what is the ambition level?

Why we are doing this?  Are we building up a brand,  uh, you know, appreciation of, of, of employees and treating everyone equality? Yeah. Or it's just the bare minimum that we are doing and complying with, with, uh, uh, legislation,  everywhere we operate. So ambition level and the ownership and the path forward. 

So, so what we see as well in, in, in what we do sometimes is that we want to communicate the value and the potential value of what shares can become in the future. And we see like just there and a huge difference, right? There are some companies, non listed companies that wants to try to make the best gamified version of the company value until you are listed because you don't really have value and provide the, the employees with that sort of info.

Pretty much as, as often as they can in the best way possible, of course, knowing that it's not an exact answer, but still. And there is someone that doesn't want to communicate anything of a value before an exit. Right. So it's just like this, this huge difference because of, yes, it can go down, it can go up, but I think this is like Yeah.

How? And again, it's back to the culture. If you come from a company that are not used to doing any of these things at all, and you suddenly start with these fancy gamified things and people may get  horrified, right? Because of that, it's actually going down or we've got a down run or so. Yeah. So it's no, definitely  take culture and where you are into, into consideration when building it.

Yeah.  Um, how about, um,  Geography, different countries, do you see that there is any countries that are further ahead, lower behind or kind of longer behind or, or how do you, or are there any differences at all?  Um, in my eyes, obviously pay transparency has developed and evolved in the U. S. quite a lot. Mm hmm.

So there are states in the U. S. That have defined quite strict laws on reporting and defining paid transparency.  Um, but it's also very much market driven. So if there is a, I mean, since there is a, you know, really a lot of competition within the industry,  there are companies are using these as an advantage.

I mean, they building up on paid transparency, be clear. So it's a lot market driven as well.  And then in Europe, we have a UK, quite developed. It was, uh, some years back when they introduced the law on reporting, defining. So it's also regulatory, but also, you know, market driven. I see that within Europe, many countries in Europe, they are, and we are very much, um, legislation and compliance driven.

Yeah. So, uh, there are some. Some industries, uh, some companies are already building up and using, but it's much more legislative driven. And of course within European Union, the new directive puts a lot of effort on gender pay. So how we define the pay and what are the differences between different genders.

And then again in Asia, uh, I see that, uh, quite often.  Obviously, uh, quite underdeveloped, not everywhere, but in many places and a lot of European companies are considering since they have to comply with European Union, pay transparency directive, how they would apply that, for example, in Norway and for example, in Asia, they have the same rules set, same structures, same level of ambition. 

And to kind of connect onto that, if you are a global company. or with people employed in many jurisdictions. Have you experienced that that may cause friction related to this topic? That like, okay, one culture may be used to a more or less transparent way of working. Um, and a company tries to kind of bring that on or the other way around.

Is it any kind of room for, uh, doing, uh, doing wrong here?  There are definitely cultural differences. Uh, even, you know, within, of course, the European Union and Europe, uh, but there's also generation things. So if you have a leader in a country X and the team is somewhere else, there might be, in addition to cultural differences, also the kind of, um, you know, gender difference.

How openly we talk about, do we?  Do we explain the differences, uh, what are the criterias and so forth. So bigger you become and more, uh, more international operations you have. In my mind, you need more clear guidance,  structures,  and basically ownership on the matter.  Um,  if we,  if we dig a bit into kind of,  if you, if you are in a case where, where.

You aren't so transparent and you want to be more transparent. And I'm just thinking here that, that it may be, uh, easy to do wrong if you start off with being transparent and showing everything, but you don't have the structure in place because if like,  if you just be transparent and you have a lot of. 

Unfairness in, in what you have that you're just transparent of your unfairness. So can you say anything about how, how to start if you, if you are like, okay, if you realize shit, we're not really good at this. So, so what's the first steps and how do you kind of go about it? High level 

the first step.  In my mind and based on my experience is to have a really good dialogue with CEO and the management.  So this is what is happening in the marketplace. This is what our competitors are doing. What is our stance on that one?  Do we want to be leader in this industry? Because this is a great opportunity for the companies.

to build up. If we want to be a leader in this industry, we want to be follow the market. That's also fine. But I guess the first thing is to, to what is the ambition? The second one you need is understanding of the current. So you have to analyze a bit because there's a quite a lot of costs related. As we know, if someone has been paid high  due to their historical reasons,  acquisition, whatever,  hardly never, you actually push down the salaries or total compensation, which means that you might have quite a lot of.

You know, things to work out  if there are untestified differences, there's a cost element. And of course, any CFO would ask that, you know, how much does it cost?  What shall we do? How do we mitigate? So it's really good to have your things in, you know, the, the, it's really good to analyze first. How big is the topic and issue? 

So I wouldn't start the communication. I would have the ownership, the ambition level. I would have understanding the current situation. And the good practice is also to fix some things that might be wrong.  before going out and saying that this is an important topic and everything shall be better in the future.

I think that part there is a something we could have had in kind of a separate, separate discussion, how to fix things that are wrong. Because I think that is also super hard because when you do that. Kind of call it like, uh, you analyze everything and you find out that, as you say, because of an acquisition or two acquisitions before we have a couple of people here that earns twice as much as they should if you align it with the rest of the company.

And if you are suddenly to kind of present that on a whiteboard, this is the salary structure and the salary is on a, of course, I'm not knowing that they don't do that, but still how  to fix those things. Um, can you say like just a couple of sentences about it? Is it common to do it? And how do you go about it if it's like a double, double, uh, wages on someone? 

So, there are really advanced tools available in the market,  analyzing easily  how to deal with, with the differences. And I guess the key here is again, what are the differences that we can justify? If there are two people in the same position, someone has more experience, higher performance,  know how it's better,  he or she might be winning.

You know, in line with the company policies and structures, but there might be also unjustified differences. And for example, within European Union, the reporting will focus a lot on, on gender pay and how the differences are defined. So there are tools available and I really would recommend to, to consider starting with that analytical.

So we have data. Backing up. Hmm.  To me, interesting topic that, that we, for example, see in the uk is that this topic becomes very soon a board topic. Hmm. So in UK when the similar legislation came up, um, there were annual general meetings where the shareholders was asking  at how come we are paying 50% less for females than males?

Mm-hmm. And it's a very difficult topic to manage. It is in the A GM. Yeah. So.  The biggest risk for companies in addition to, to possible, you know, uh, unequal  treatment and the court cases is the publicity. So no one wants to see your own business  in the press or, you know, in some kind of a case. You know,  suddenly mm-hmm

And that's the, the biggest risk for the companies. We don't comply if we don't have structures. Yeah.  No, I think, uh, again, yeah, it's, it's a bit back to, back to what you, you'll find out that, that there are some things in this, uh, when you analyze it that can't really stand daylight in a way, and those things, it's kind of a simple test, even though it's complex in a way.

Yeah. It's, and in addition, if you think about acquisitions mm-hmm. If you buy a company mm-hmm. Who doesn't have any structures, who doesn't have any fee, you know, uh,  policy in place or practices in place and you buy that and you also buy quite a lot of risk.  So to me, this is already a topic. Yeah, I agree.

DD, due diligence processes, to really understand. Yeah. Deep dive. That's a very good point. Definitely.  Um, when it comes to company sizes, um, obviously you have listed enterprise companies, you have, uh, SMBs and so, and you have, have startups. Of course you can categorize it the way we want, but, but are there any,  uh, any rule of thumbs based on company sizes?

And when you grow, you can kind of think or think of when, when is this getting relevant?  Well, to me in the startup phase, uh, obviously  whole companies build up on the growth, equity being a big part of that compensation.  And then for example, base salaries or benefits are, you know, on advocate level, uh, okay level, but there's not that necessarily that much pressure on, on pay transparency at the same time. 

The employees in startups,  uh, part of the younger generation  and they get, they will question that they will ask how my pay is defined,  how come I earn less or whatever. So then at the same time, quite easily startups, they need to consider how they will reply. So my recommendation is to have some simple structures in place.

Uh, and also utilizing if, if this is something that, that the startups want to.  highlight and build a brand around this that, you know, equality is an important topic we want to build up. Um, uh, everything is not necessarily in place, but this we are working on.  And then when the company grows,  What typically happens and once you have 500 employees, 600 employees in, you know, two or three countries, you would suddenly need some structures. 

You would need some practices and way of working, not being necessarily over bureaucratic and too, too heavy processes, but some structures. that you can define, but at the same time, you can also manage  healthy business. Yeah. You know what you're doing, how the market is, how things are defined, how, for example, salaries are reviewed and so forth.

So typically you need some structures. And of course, pay transparency is something that you can fairly easily actually, uh, Build on and, and, and, you know, connect with once you are thinking about the processes and structures that you can build in. I think if you build these structures good, it can actually also help you grow faster. 

Because if it's like always have to do everything on like an ad hoc basis and you don't really have a system or a structure, it can get even harder, right?  Definitely. And then I would highlight also the investment of the cost level. So yeah, we have the structure. Of course, it takes a bit of time and so forth, but then you actually can.

make decisions that are justified based on data.  And then you can build up the equal treatment, you know, feeling of equal treatment within the companies. So that's actually, it's a, it's quite nice spot to build up if you want to.  And then once we come to the, you know, listed companies, um, They typically have some structures in place, uh, enlisted company environment, there's typically many countries. 

So, so in practice you need some people also in countries, in regions who understand the topics. There will be quite a lot of local legislation and so forth to comply with.  Uh, there's a lot of effort for reporting.  So under the European Union,  pay transparency directive, companies need to  basically annually report the gender pay differences, things like that.

And it also becomes very easily the board discussion, how we are actually treating our employees, what are the differences and so forth. So I would definitely recommend companies to prepare early enough, as we know. And the paid transparency directive, that is first relevant for you when you are a listed company, or is that something that others also need to comply with?

It  is actually a very good question. Again, I mean, it's actually something that all companies need to  comply. The reporting piece is something that differs  based on size of the company.  The directive has been decided already.  And it will be implemented in all European Union countries,  um,  before June 26. 

And then the interesting piece from company's point of view is that every country is in a different path. So, for example, Sweden came out with the Swedish interpretation and, uh,  very heavy guidance on how it will be handled in Sweden. Belgium was the second one. We're expecting to see the same in Spain and so forth.

So, every Every country will have a different timeline and then the requirements will be slightly different  between countries. So there will be some complexity within companies and bigger you become,  more operations you have,  there is some work to be done. But everything is doable. There are a lot of companies who have done this and it is just to start early.

It is a really good time to start right now. Yeah. Yeah, no, that sounds good. And then, um, one thing that, that many that we talk with find very, very difficult, uh, and I know it's not 100 percent related only to, to pay transparency, but I know you, you have some thoughts on it and, and it's, it's, it's a bit related when you nominate people, kind of how do you, especially like in the LTI plans or in, in broad plans where you have different levels,  Can you say anything about, like, in your view, how should you, should you structure that approach?

Because you will have differences. People will like it, dislike it. How transparent are you and how do you differ?  It's a very interesting topic.  So if you think about the nomination process to the LTI plans. Uh, obviously you have a level in the organization  that of course is one driver why someone is nominated to a plan.

The others might be the, the function or the area of work that, you know, what is more strategic or critical or crucial. And  then it becomes very easily, you know, individual skills and competencies and know how of individual employee.  And then  all companies, they have to consider what are the criteria.  to nominate someone into the LTI plan, because basically, for example, the directive, it will include also the, um, incentive plans, how those are treated, do we have equal treatment, and for example, what, what is typically used in the US is that, that, um, You have  defined jobs on certain levels and certain jobs are included in the LTI plan.

If you are working in that position, you will be eligible. And what companies are doing, they typically adjusting the amounts, for example. So basically it will be more and more driven by the structure and defined policies instead of selecting people. on individual basis, as long as, I mean, of course you might have very strict rules and criterias, but then you have to be also able to communicate that. 

Yeah, we have had a few cases where we basically see that, let's say you're 8, 000 people in a company, you want to do a broad based share investment plan where everyone can join. And you have said that we will have five. five levels. So like, and then the company says that we don't really have those levels here now.

So then, then like, it's not a natural way of doing that, but still like it comes from the board and the, the owners that we should differentiate and somehow we should, and then HR just kind of gets That, Oh, five levels where to start. Right. And it's a minefield where you try to draw some lines in a company that doesn't really have those lines.

I think that's, it's, it's a super, super hard, um, salary is a bit different because everyone has a different salary, but this is a clear line. You're A team, B team, C team, D team, E team. Indeed. That's, uh, and at the same time, more and more people are talking very openly. Yeah.  If you are part of the plan, are you eligible to a plan? 

I'm not. How, how you became part of the plan and so forth. Yeah. So there's also the pressure I would highlight from company's point of view. There's a pressure from employees that will be quite.  tough.  There's also pressure from the peer companies. So if, if more and more companies are clear about the pay transparency and definition criteria, it's really difficult for you in the same industry to say that, okay, we don't share anything and it will be very, you know, following the market.

So in addition to legislative changes, there's also the peer pressure, both from employees, but also from companies.  I'm trying to, I'm hijacking your brain a bit now, but, uh, and, and you're not prepared for this, but, um, bored, bored, uh, compensation and LTI. Do you have any experience there? Have you seen like, what are others, what are they doing?

Do you include bored? Do you not? Why, why not?  Uh, the bored compensation is basically. quite much reported and regulated. So investors are typically of course, very keen to see how board, CEO and so forth  are compensated. So personally, I don't see a lot of pressure on that. It's pretty much, uh, in place.  You have proxy advisors following that up.

And then you have basically AGM, where you have to Report. Yeah. The definition, I mean the policies, but also the actual payouts. I find it a bit hard sometimes when you get these questions, like  we want to explore if we should include our board in some sort of LTI plan. Do we do it or not? If so, what do others do?

It's a very, of course you can do, dig into annual reports and kind of find, find all that sort of information. But I think it's, it's a topic that is not so. Well, kind of, um, defined and everyone kind of wants it, but yeah, as you mentioned, proxy advisors say,  what do they end up with? I think it's a bit, uh, it may be another, another episode because I think that's, uh, that's an interesting thing.

Yeah, it varies between countries. So some, some countries it's quite common to pay part of the board fees, for example, on shares. Yeah. And in some occasions it's not that common at all. No.  I think it's often a challenge in terms of risk, right? Because if you, if you do like a stock option planet, that's what we have.

And you give your, your, your border stock option plan, they will be derived to take a lot of risk. You know, if they invest, it's a bit different, but yeah, no, it's um.  Definitely a, an interesting topic as well. Um,  so, uh, it's a lot talk about like the Gen X, Gen Z, Gen, the millennials. And so do we see any differences in what sort of generation are there any changes here, uh, in terms of, um, uh, transparency and demands here? 

Um, naturally.  It's a bit of stereotypes,  but then at the same time, it's a lot of, uh, practical examples. So those who have been around for quite some time see the whole pay transparency.  They don't necessarily see the value of that  purely because they have been living in the, in the era where salary was not discussed. 

It was my business. I define or ask what I want to get and so forth. Yeah. Thanks a lot. And then there's kind of, uh, you know, people in their 30s  or  40s who are in between, but if you think about the younger generation, they take You know, in general, pay transparency as a hygiene factor, naturally, we are paying the, you know, same way for the same kind of job,  despite whether you are, you know, what gender you are or what ethnic background and so forth.

So they, you know, take it granted at the same time within a company, you have all of these three categories of employees.  And then in the end of the day, it's a line manager who needs to explain  the differences, what drives pay, and  so forth.  In all of the companies, there will be a quite a lot of training, both managers, but also employees, why this is important,  how does it drive business?

Yeah. And, um, yeah, we believe in this. In your mind, do you think like if you were, call it like the CEO in a company with 200 people  and you saw a candidate in another, Call it like country or an important area for you to, to put something on and you know that it was a very different, uh, salary structure that you needed to do something else.

How would you, is it possible to get that into the framework of still being transparent or is that like, no, this is our salary bands. We can't do it. Can you still be opportunity driven or, or how would you, do you think it's possible to bridge those two things?  Very good question. Again, I mean. It is definitely  possible. 

What is required is again, you know, principles and kind of thinking a bit of policy back, you know, for example, using headhunters typically means that you're looking for a very specific kind of competencies and skills.  And then you have to pay a certain amount, but now you have to set the limit and structure that, you know, given everyone else, are we treating our employees in a, you know,  fair way? 

And, and, uh, you have to basically document the decisions that you have done.  A lot of reporting and so forth will be based on  a similar kind of jobs,  same jobs. And if you have huge differences. It becomes more difficult to explain, but as long as you have a policy, you have a view, it's definitely doable.

Yeah. So you can basically have something in that policy saying that like specific, if it's very, very specific know how or domain or experience or anything,  it's call it like a different salary band again. It's because of that. It's yeah. Yes. There are, there are ways to deal with that. Yeah.  That's good.

Because I think, I think that part is, is, is something that many will, if you get like these bands, these bands, you kind of lose the possibility to be opportunity driven. And I think many thinks it's either or and kind of bridging those things to, to, to continue to be, uh, to have the possibility to kind of get those resources.

As long as you can justify that. Yeah. And have defined. Yeah. And then of course, following up. So if someone is brought in with the higher salary, you have to manage the expectations. And most likely he or she won't get that high salary increases and so forth in the future. Yeah, no, fully, fully understand. 

Um, there's been some changes, uh, over the last 10 years, as you mentioned, things are happening in 25, 26, and things are getting more and more, uh, call it regulated. Um. What do you think is the future of this? Like, uh, in  2026, 2030, how fast will it be implemented?  Again, this is like hard, but just your thoughts on it. 

Well, we have a bit similar example called GDPR. Yeah. That's a game. And naturally, there were companies that took that seriously,  there were some companies, you know, in the last minute, fulfilling the requirements, and there were some companies who are still working on the matters, and yeah, of course it's evolving.

I guess what we see in the UK, and what we will see in Europe is that there are early adopters who use this as an advantage, start early, building up. Yeah. A lot of companies will fulfill the requirements. They will be compliant. Yeah. I guess there will be some last minute changes and work and so forth.

And there will be some companies who won't necessarily comply and they will live up to the risk. Yeah. Um, most likely.  Um, if we think about the next  wave, After the pay transparency will be improved, for example in Europe.  The next phase will be that it will open up the discussion that for example if,  let's use example of females, so if there's a team of ten employees,  eight males, It will open up the discussion whether, for example, the females have the same opportunity  to be part of the great projects or same opportunities for promotions and progression. 

So once this compensation element is kind of, uh, ramp up and build up, it will, the discussion will be more about the learning opportunities than equal treatment and other processes within companies. Hmm.  This is what I'm, I'm seeing and I'm, uh,  yeah, evidence is, yeah,  no, I, um, I agree. I think it's definitely a topic where companies just need to lean forward and understanding and kind of finding their way of navigating in and, uh, yeah, as soon as possible, basically.

Yeah.  Good. I think, um. That's basically, we covered most of the topics that I really wanted to touch upon and a few others as well. But I think, uh, I think this is, uh, awesome, always great to talk to you. And, uh, and maybe that I, I, I try to reach out and get another one. But, uh, yeah, thanks a lot for joining.

It's been a pleasure. Yeah, it's a pleasure. Yeah. Thanks.