Reference no: EM133105610
Designing total compensation packages for expatriates and local host country nationals is often quite complex and, at some companies such as Unilever, always changing. Brian Dive, the head of remuneration at Unilever, an Anglo-Dutch food and household-goods conglomerate, must deal with the problem of how to pay his twenty thousand managers in ninety countries from Bangladesh to Britain. In the past, the boss of a region or a big country determined pay, but now at Unilever, as with many other multinationals, brand managers in different countries are determining pay. Recently, Unilever moved from a narrow grading structure to five global work levels. Managers' pay is still based on the country in which they work, but Brian thinks there will be a regional convergence. In time, he believes, "we will have a pan-European rate."
According to Jonathan Barnes, chairman of Korn Ferry's EMEA (Europe, Middle East, Africa) region, there is a convergence trend in global compensation. Managers in any of the time zones are increasingly rewarded the same way. But, because their main source of people with technical skills is New York, pay for the moment tends to move to the New York level. As New York pulls up London, so London pulls up Europe. To keep talented people in France, says Marina Eloy, who is in charge of global human resources at BNP Paribas, a French bank, Paribas must pay British prices. She notes, "As soon as someone has an international side, you have to give them double the domestic equivalent." In Canada and Mexico, compensation committees routinely look at American boardroom pay in deciding what to offer their chief executives, because they know how easily good managers can move across the border for more money. The market rate for top talent in various industries will continue to converge as more senior executives speak English and gain the increasingly sought-after experience of working in several countries.
Executive compensation often represents a stumbling block in many mergers between American companies and firms from other parts of the world. Whenever a non-American firm buys an American one, stock-related rewards cause problems. A Towers Perrin compensation consultant spent many hours jetting across the Atlantic trying to explain to a French company that had just bought an American company why the American executives needed to retain their stock ownership plans. The consultant explained that the stock incentives are provided because "the Americans are afraid their managers will leave." But the French kept responding, "They'll stay. This is a nice place to work." Senior executives working for British Telecom when it was trying to buy American MCI found it difficult to swallow the idea that some people in their multinational executive teams would be better paid than they were. Almost always, the best way to address these perceived fairness challenges includes new stock incentives (or something similar that fits local legal requirements) to bring a greater sense of equity for MNC executives across business units.
From this scenario and your reading, what are some of the biggest challenges faced by MNCs in their global compensation practices?
What are particular global compensation challenges encountered in the process of implementing successful international mergers?
What are major areas of convergence in global compensation, and what are forces that are driving this convergence?