Exam 10: Rewarding and Compensating International Employees

Multinationals construct allowances by comparing the cost of a "market basket" of goods and services in the home country with the cost of a similar basket in the assignment country. What are some of the typical items that would be included in such a market basket?

The goods and services differential provides the basis for paying expatriates a cost-of-living allowance. What factor does not need to be considered when calculating the differential?

The localization approach for compensating expatriates can be varied with adjustments (e.g., to base pay, allowances, retirement, etc.) to in effect render it a hybrid (of localization and ad hoc).

What are the most common potential approaches or methods for how to determine the compensation of expatriates?

Compensation systems used by multinationals are typically designed and implemented to maintain compensation levels that align well with competitors while also closely watching costs.

There is research that suggests cultural grouping (e.g., Asian, Latin, and European) explain compensation practices much worse than country-level customs and laws.

Compare the characteristics of the compensation system in a strong individualism (e.g., the United States or Canada) versus a strong collectivism culture (e.g., Japan, Korea).

Multinationals spend time on performance evaluation because it helps them set and manage compensation levels around the world, a simple and static task.

Dealing with tax issues is probably the most complex aspect of the balance sheet method. What factors contribute to this complexity?

Countries with a high uncertainty avoidance culture (e.g., Japan, Korea, and Portugal) are likely to have compensation systems with which of the following characteristics?

What are the key goals multinational firms have in mind when designing, developing, and implementing a compensation system?

Describe typical problems encountered when determining how to compensate employee performance, then explain how these problems are complicated by an international setting.

What reasons are given for the fact that the number of firms that do not pay any incentive premium at all to work overseas has nearly doubled in recent years?

The Japanese view of compensation is traditionally paternalistic and egalitarian, providing slowly increasing rewards for length and extent of service and for skill acquisition rather than performance.

There are many nations where workers earn just a fraction of the wages typically offered in the United States, while the United States has earned a reputation for paying its senior leaders more than other countries anywhere else in the world.

Which of the following statements accurately describes cross-national difference in senior executive compensation?

According to the balance sheet model, what are the four expense categories used to begin the process of smoothing out cost of living and tax differences across countries?

Multinationals have many sources for estimates of goods and services prices worldwide as well as the differentials that may be necessary when sending expatriates to particular locations.

Some multinationals still pay a premium or incentive to the expatriate for taking the foreign assignment (often ranging between 10%-30% of base pay) and they may also receive hardship pay if posted to locations where living conditions are more difficult than in the home country because of which of the following?

Which of the following contribute significantly to the high cost of expatriates for a multinational firm?