📬 Equal pay: Getting global comp policies right

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We’ve got some great topics. Here’s what’s on tap:

Now, let’s get into it.

Primrose from the US asked:

Hi SecretCFO,

For a VC firm like ours, people are 90% of our expense. As a CFO, I am trying to develop firm-wide guidelines for our global workforce that will standardize and professionalize our approach to compensation.

When establishing compensation across diverse markets, what principles guide your approach to balancing local benchmarks, FX volatility, and inflation? Additionally, how do you structure merit-based increases to drive retention without overextending the budget in volatile markets?

We are a small firm, but I find your experience with large companies relevant and insightful. Thanks!

Hey Primrose.

More of an HR and reward question than a pure finance one, but here is how I think about it.

Across your total compensation package, the key decision is which components should be universal and which should be market specific. Let me work through them.

Salary has to be market specific. Cost of living varies dramatically across geographies, tax rates vary, and local talent markets set their own clearing prices. You need to be competitive in the market where your people actually live and work. And to be clear, competitive means in local currency. FX rates are largely irrelevant to what you offer.

They matter to what it costs you in dollar terms, which is a treasury and budgeting question, not a compensation design question. So don’t confuse the two.

Inflation adjustments also need to be market specific, and this one catches people out more than they expect. If you are building offshore teams in high-inflation markets and applying a blanket global adjustment, you will quietly lose your best people, and then be exposed to that inflation rate anyway, when you replace them.

Merit increases and bonus potential, on the other hand, I see no reason why these should not have a universal approach in percentage terms. If a role carries 25% bonus potential in one country, the same role should carry the same potential in another, even if the base salaries look very different. That consistency feels fair to me.

On benefits, my instinct is to standardize as much as practically possible. Meal stipends, learning budgets, whatever you offer. The guiding principle should be that the same things are available to everyone as much as is practical (healthcare could be an exception). It signals that the firm values its people equally regardless of where they sit.

In a VC context it is also worth thinking carefully about equity and carry access as a retention tool, particularly for senior hires. Could get tricky across Geographies if that is relevant.

Finally, whatever framework you land on, write it down clearly enough that managers can apply it consistently without coming to you every time. Ad hoc compensation decisions are where things quietly become unfair and inconsistent, even with the best intentions.

I am not aware of any single definitive public best practice framework on global reward strategy. If you find one, hit reply and send it over. I would genuinely love to see it.

TLDR: Salary and inflation adjustments should be market specific. Bonus structure and merit increases should be universal in percentage terms for similar roles. Standardize benefits where you can, and write the framework down so it applies consistently.

GoldenHandcuffs from the US asked:

I am currently at a PE firm in a Portfolio Operations role where I work heavily with portco exec teams, primarily the CFO, on implementing the value creation plan, playing interim CFO, and generally professionalizing the organization. Prior to this role, I worked at various F500 and PE-backed Firms in FP&A. I've found working at the portco to be more interesting, but the comp to be better at the fund level.

What would you recommend in terms of staying at the fund level and continuing to advance vs. making a move to the portco, as either a CFO at a middle market, or VP at an upper middle market firm? I see it as a tradeoff between comp vs. day to day interest.

GoldenHandcuffs, congratulations first. Sounds like you have done well on both sides of the table, so this choice is very much a first-world problem.

Let me give you a guiding principle before anything else. Your long term plan should always be to do the thing you enjoy most… life is too short for it to be anything else.

If you want to be a portco CFO, that should be the destination. So, the question should purely be one of timing.

A lot of this decision comes down to opportunity cost, and how much the incremental comp is worth to you. If you are already financially comfortable, let your heart rule. It’s not like a portco CFO role will put you on the bread line.

The good news is there is no burning platform here. A few more years at the fund, advancing a level or two and banking some healthy bonuses, only makes you more marketable when you do make the move. You are not losing ground by waiting.

There is also a market timing dimension worth thinking about. Right now PE deal flow is relatively thin. Many funds are sitting on assets they have held longer than planned, waiting for exit conditions to improve. That means fewer fresh portco CFO roles, and more competition for the good ones.

So my instinct is to let supply and demand play this out. Plan for the portco move, but do it when the market is pulling you in rather than when you are pushing your way in.

You will know better than me, that the quality of the deal is the biggest determinant of how much fun you’ll have as the portco CFO.

When demand for new PE CFOs is strong you will have your pick of opportunities. On which note, don't overlook the internal move. Moving from portfolio ops into a CFO seat at one of your own fund's portcos is often the cleanest path of all. Warm relationships, known quantity, no recruitment process… something to think about.

In the meantime you are building skills, getting a better feel for what a good portco role looks like, and collecting fat bonus checks.

Nice!

TLDR: The destination is clear, so your only question should be timing. Keep doing a great job and collecting the bag. Then time your move into a PE CFO role when the right one comes (and don’t rule out an internal move).

Anon from Spain asked:

What does your news consumption look like?

I spend 30-45 minutes every day reading the Financial Times and a local Spanish newspaper. I also subscribe to a few newsletters.

What is your habit? How much time do you spend on the news, and in which publications? Any newsletters you recommend? In terms of newsletters, I think there is lots of average content, finding out the outstanding ones (like this one) is quite difficult, so keen if you have any recommendations.

I have seen a "Secret CFO" commenter in the FT by the way. I’m curious if that's you or not.

OK Anon… I have a dirty secret to confess: I do not consume a lot of news.

Which is a polite way of saying I try to remain deliciously out of touch with the world, and I am largely at peace with that.

I find it almost impossible to consume news without absorbing a relentless stream of negativity alongside it. At this stage of my life, managing my mental energy and headspace matters more to me than being current on every global development. The space that creates is where my best thinking happens.

That said, I do consume a lot of content. Whatever news I absorb tends to come through the lens of the niches I actually care about: music, sport, business, and increasingly media. Podcasts are my main format: Prof G, Acquired, and a growing list of new media podcasts are my favorites. I have also been enjoying TBPN (although the vibe has shifted a little since OpenAI bought it); live daily tech news in a format that feels genuinely novel.

To be honest, it sounds like you are pretty much plugged in (and out) in the right ways. That’s a good place to be. Reading the FT daily is a genuinely good habit, add in a couple of carefully selected podcasts, and a handful of newsletters you actually look forward to opening. I’m glad I’m one of those for you.

One newsletter worth adding to your repertoire is Educated Guesser by the brilliant Bucco Capital on Twitter.

Also, I’ll have a podcast soon, so there’s that too… watch this space.

On the FT commenter: That is not me. But now I am curious, so please send me a link!

TLDR: I barely consume news and I think you are probably better off for being unplugged. Keep the FT, add a few great podcasts, and be ruthless about what earns a place in your attention.

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Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need