Using Ownership Incentives in China
International Accounting – Case #1
Question 1:
There a different ways for Roy Weber to export a local culture of ownership.
He could do so by paying his employees in China the same way he pays his employees in Silicon Valley, meaning that their payment would consist of salary and a percentage of stock ownership depending on their position in the company. With employee ownership he motivates the workers to work hard and responsible because their own success depends on the success of the company.
Also this sends the signal that he values everyone in his company the same way, because everyone is treated equal.
The problem here is his Chinese workforce could think that he tries to force the American way of doing things on them, neglecting Chinese business values.
He could also stick with limiting stock ownership to his American team. In this option he would have to create a different payment and ownership culture for his Chinese team. The difficulties here would be that some members of the Chinese staff probably want to have stock ownership.
Another way to solve this problem would be to have a different equity structure for both locations. This solution would let PeriRaden optimize the payment methods depending on the region especially with regard to taxation, but this would lead to problems concerning accounting.
PeriRaden’s CEO could also send some of his American employees to China to introduce PeriRaden’s system and to train the Chinese staff. Disadvantages of this model would be the absence of the American staff for other operations and their lack of knowledge of Chinese business tradition.
Question 2:
His decision is mainly influenced by the Chinese culture and history of employee ownership.
Since employee ownership is already existent in China it should not be too difficult to export a payment model that is similar to that of his Silicon Valley team. Since the 1990s a mixture of salary and equity has been used by 17% of large scale Chinese
Question 1:
There a different ways for Roy Weber to export a local culture of ownership.
He could do so by paying his employees in China the same way he pays his employees in Silicon Valley, meaning that their payment would consist of salary and a percentage of stock ownership depending on their position in the company. With employee ownership he motivates the workers to work hard and responsible because their own success depends on the success of the company.
Also this sends the signal that he values everyone in his company the same way, because everyone is treated equal.
The problem here is his Chinese workforce could think that he tries to force the American way of doing things on them, neglecting Chinese business values.
He could also stick with limiting stock ownership to his American team. In this option he would have to create a different payment and ownership culture for his Chinese team. The difficulties here would be that some members of the Chinese staff probably want to have stock ownership.
Another way to solve this problem would be to have a different equity structure for both locations. This solution would let PeriRaden optimize the payment methods depending on the region especially with regard to taxation, but this would lead to problems concerning accounting.
PeriRaden’s CEO could also send some of his American employees to China to introduce PeriRaden’s system and to train the Chinese staff. Disadvantages of this model would be the absence of the American staff for other operations and their lack of knowledge of Chinese business tradition.
Question 2:
His decision is mainly influenced by the Chinese culture and history of employee ownership.
Since employee ownership is already existent in China it should not be too difficult to export a payment model that is similar to that of his Silicon Valley team. Since the 1990s a mixture of salary and equity has been used by 17% of large scale Chinese
Cited: http://cog.kent.edu/lib/SituConferencePaper.htm http://www.economist.com/node/18928526 http://cog.kent.edu/lib/Logue&Zhangesopchina.htm http://www.nber.org/papers/w14230.pdf?new_window=1 http://www.britishchamber.cn/content/latest-developments-variable-interest-entities-vies https://www.nceo.org/articles/esop-employee-stock-ownership-plan http://qje.oxfordjournals.org/content/120/2/729.full.pdf+html