Challenges in International Benefits
and Compensation Systems
of Multinational Corporation
Grambling State University
The aim of this paper is to examine developments on the type and amount of compensation necessary to attract technically and culturally qualified international managers and technical professionals to the three nationals or country categories involved international human resource management activities from which employees are selected whether the people are PNCs, TCNs or HCNs. This paper will draw on research, which has been completed over the last ten years with the growth of international business and workforce. Since the principal problem of salary levels for the same jobs differ among the three primary labor pools nationals, this papers also examines and sees if any progress has been made toward restructuring compensation and reward systems among the three types of employees of an MNC who perform the same job in the same subsidiary. MNCs’ HR managers have a special role in ensuring that international compensation policies deal fairly among the three types of employee’s managers who perform the same job. Such fairness may maximize international employees’ performance. In particular, we are interested in how international compensation is practiced among the three types of labor pools of all managers regardless of nationality in an MNC.
The African Economic and Business Review, Vol. 3, No. 1, Spring 2002 2
A multinational corporation (MNC) is usually defined as a company with operations in more than one country (Porter, 1990). This means that an MNC has significant assets in terms of plants and/or offices in one or more foreign nations and derives some of its profits from these operations (French, 1998). The growth of the global economy has increasingly pushed MNCs into all corners of the world.
The impact of the growth of international economy has become a major force in business in general and in human resource management in particular. These practices are important realities faced by MNCs doing business overseas. MNCs must coordinate policies and procedures that effectively balance the needs and desires of host country nationals (HCNs), parent country nationals (PCNs) and third country nationals (TCNs). Compensation is one of the most complex areas of international human resource management. Pay systems must conform to local laws and customs for employee compensation while also fitting into global MNC policies. It is also important for MNCs to consider carefully the motivational use of incentives and rewards among the employees drawn from three national or country categories.
International business has been around for centuries. However, the growing impact of MNCs is a relatively recent phenomenon. Most big MNCs operating overseas during the 1950s and 1960s were Americans. In the 1970s and particularly in the 1980s the nature of international business operations became global in nature. MNCs are a natural outcome of the global economy and they are playing an increasingly major role in the global economy.
Much of the growth in international business is in developing markets that are outside of traditional economic powerhouses like the U.S., European Union, and The African Economic and Business Review, Vol. 3, No. 1, Spring 2002 3
Japan. In fact, developing markets are expected to capture 50% of world gross domestic products (GDP) in the near future. The bottom line is that consumer demand in developing nations is rising as they become more affluent and percapita income increases (McFarlin & Sweeney, 1998).
The internationalization of business and employment is reaching a dramatic dimension as we enter the 21st century. Overseas investments by American MNCs have increased tenfold during the past decade. During the same period, the number of foreign-owned domestic firms has increased...