Deck 10: Rewarding and Compensating International Employees

Question 1

Which of the following statements accurately reflects how vacation time varies across different countries?

A) Workers in the United States and Canada have among the most paid days off of any country in the world
B) European, Middle Eastern, and African countries tend to be the most generous with vacation time
C) Countries in the EU require companies to provide paid 15 public holidays plus a minimum of 30 paid days off annually
D) All of the above

Answer 1

B

Question 2

Countries with a strong individualism culture, (e.g., the United States, the UK, and Canada) are likely to have compensation systems with which of the following characteristics?

A) Nonperformance variables (e.g., seniority) matter in raises
B) Group compensation schemes often are successful
C) Equality/need are important norms
D) Equity is used to distribute compensation

Answer 2

D

Question 3

An effective compensation plan for expatriates will likely include all of the following except:

A) Support for any trailing family members
B) Plans to repatriate the employee back into the home country after the foreign assignment concludes
C) The same compensation and benefits package as employees in the home country
D) Maintenance of a reasonable/comparable standard of living

Answer 3

C

Question 4

Which of the following statements accurately reflect a key issue related to housing costs for expatriates?

A) Housing alone may account for 70% of the total additional compensation
B) Housing is typically rented and often covered by a shorter-term lease, thereby driving up prices
C) American firms are more likely to provide free housing than housing allowances compared to Asian, Latin American, or European multinationals
D) Expatriates can frequently find accommodations comparable to those in the United States, including many premium add-ons in cities like Tokyo, London, or Beijing

Question 5

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

A) Provision of standard benefits such as a housing allowance
B) Financial increments and assistance with acclimating to a foreign culture
C) The standard interviewing and hiring process
D) Provision of retirement and medical coverage

Question 6

Why do multinationals spend so much time on performance evaluation?

A) It is a simple task for managers to do
B) It helps set and manage compensation levels around the world
C) It is relatively easy to administer and conduct for managers and firms
D) The reward and compensation systems are complex, but do not have to be customized to a firm

Question 7

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?

A) Extreme weather, civil unrest, and violence aimed at foreigners
B) Civil unrest and violence aimed at foreigners, limited access to common goods and services
C) Limited access to common goods and services, extreme weather, civil unrest and violence aimed at foreigners
D) None of the above

Question 8

The compensation systems used by multinationals are typically designed and implemented with several key goals in mind, including which of the following?

A) Maintain consistent and fair compensation levels for all employees wherever they are, taking local differences into account
B) Maintain compensation levels that align well with competitors regardless of the costs
C) Attract and retain the best people to staff positions in the home country
D) Transfer people to various firm locations regardless of the difficulty for the individuals so long as the firm's interests are considered

Question 9

There are numerous complications for multinationals that would not be important for a firm that is not multinational when it comes to developing and implementing a compensation system. Which of the following factors must be considered by multinationals?

A) Requires the same amount of time on performance evaluation to help set and manage compensation levels around the world
B) Must account for the variety in human resource practices that exist among all their competitors
C) Must deal with the special compensation challenges associated with sending expatriates abroad
D) Must account for the fact that living costs, attitudes about pay, and laws governing compensation are consistent from country to country

Question 10

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?

A) A comparison of 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
B) Coming up with prices for items such as domestic supplies, food, transportation, and utilities across countries is a simple, logical process, but must be updated frequently
C) Goods and services differentials need to be monitored and periodically adjusted up or down
D) Currency swings can impact goods and services differentials by swelling the value of differentials when local currencies drop significantly and shrinking them when those currencies soar

Question 11

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

A) CEO total compensation in the United States is three times as high as the next closest country (Canada)
B) In U.S. firms, senior executive compensation is usually balanced between 50% variable performance measures connected to stock prices (e.g., stock options) and 50% performance bonuses and base salary
C) According to one survey, roughly 60% of a top executive's compensation in the United States comes from long-term incentives, with base salary and performance bonuses accounting for 40%
D) In some countries, such as Germany and the Nordic countries, almost 25%-50% of the compensation earned by executives comes from base salary

Question 12

Which of the following accurately reflect views of what compensation means and entails in different cultures?

A) The "exchange" model of compensation is identical in Western cultures
B) The Japanese word for "compensation" suggests "achievement," which is consistent with a traditional, paternalistic Japanese employment system
C) Compensation within the United States is often seen as a swap in that employees provide effort and output and receive wages and benefits in return
D) The Swedish word for "compensation" means "making equal," and this is reflected in the considerable number of Swedish laws that regulate wages

Question 13

Which of the following sources of costs associated with expatriation are considered to be direct payment/reimbursements?

A) Tax reduction/equalization and currency protection
B) Spouse employment and child care providers
C) Home leave and emergency leave
D) Cultural training and language/translation services

Question 14

Which of the following sources of costs associated with expatriation are considered to be support for adjustment to global assignment?

A) Emergency leave and personal security
B) Domestic help and child care provider
C) Repatriation assistance and personal security
D) All of the above

Question 15

Countries with a low power distance culture, (e.g., the Untied States, the UK, Denmark, and Australia) are likely to have compensation systems with which of the following characteristics?

A) Highly structured, lock-step compensation plans
B) Compensation tied to place in social structure
C) Large salary gap between workers and management
D) Wage gap between lower and higher jobs that is often not large

Question 16

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?

A) High level of variable/contingent compensation
B) Bonuses/pay at risk depending on performance
C) Highly structured, lock-step compensation plans
D) Rewards given for individual efforts

Question 17

There are big differences in compensation amounts and types across borders. Which of the following examples represent the importance of these differences?

A) There are many nations where workers earn just a fraction of the wages typically offered in the United States
B) There are no nations where workers earn more than the wages typically offered in the United States
C) Wage differentials can only be used to explain why manufacturing jobs are being outsourced
D) All of the above

Question 18

The balance sheet method starts the process of smoothing out cost-of-living and tax differences across countries by dividing expenses into what four basic categories?

A) Housing, income taxes, goods and services, and retirement
B) Housing, income taxes, goods and services, and savings reserve or discretionary component
C) Discretionary component, travel, goods and services, and retirement
D) Discretionary component, travel, goods and services, and income taxes

Question 19

"Perks" are typically nonmonetary forms of compensation that are given to executives in recognition of their status or performance. Foreign companies often provide a variety of perks to help offset the bite taken by taxes, including which of the following?

A) Guaranteed job security with frequent promotions
B) Assurance of jobs for friends and family members
C) End-of-year bonuses
D) A company car, company-provided housing, and paid utilities

Question 20

A variety of options are available for how multinationals can go about constructing compensation plans for expatriates. Which of the following popular methods is not correctly defined?

A) The localization method: paying the expatriate at least 20%-25% more than local employees in similar positions
B) The balance sheet model: "balancing out" the cost differences between the expatriate's home country lifestyle and their foreign assignment location
C) The ad hoc approach: the company and its expatriates negotiate on a case-by-case basis to cover the costs inherent in a foreign assignments
D) The localization method: paying the expatriate essentially the same as local employees in similar positions

Question 21

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

Question 22

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.

Question 23

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

Question 24

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.

Question 25

Agreements across countries that allow for tax equalization or the avoidance of double taxation for citizens posted to foreign countries can help reduce expatriates' tax exposure, and the United States has such tax agreements with fewer than 50 countries.

Question 26

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

Question 27

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).

Question 28

The balance sheet method is a simple, inexpensive, and easy to administer method to treat expatriates fairly.

Question 29

An effective compensation plan for expatriates will likely include some form of incentive for an employee to accept an expatriate assignment (e.g., money, benefits, career mobility/advancement).

Question 30

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?

Question 31

The United States has earned a reputation for paying its senior leaders more than other countries anywhere else.

Question 32

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

Question 33

Various consulting firms publish prices on hundreds of goods and services and provide cost-of-living indices for virtually every city in the world, based on data that are updated regularly, and this information can be used by multinationals for compensation decisions.

Question 34

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.

Question 35

In the United States it is common to expect housing costs to be about 30% of take home pay, one of the biggest outlays in a family budget, and these costs tend to remain constant internationally so they rarely receive special consideration in the balance sheet method.

Question 36

Why is expatriate compensation such a challenge for multinational firms?

Question 37

Firms in North America tend to be the most generous with vacation time, whereas European, Middle Eastern, and African countries provide the least and in between are companies in the Asia/Pacific region.

Question 38

Data does not support the view that expatriate compensation preferences are tied to cultural environment, and it is possible to strike a balance between standardization and the needs of a far-flung and heterogeneous set of employees.

Question 39

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

Question 40

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).

Question 41

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

Question 42

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?

Question 43

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?

Question 44

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

Question 45

Describe some of the practical problems that emerge when expatriates are sent to places where costs are generally lower than at home.

Question 46

The balance sheet model is the most common approach to expatriate compensation and is used by nearly three-quarters of the firms responding to a recent global survey. What is the key aim of this model and what one aspect of an expatriate's compensation is not impacted? Briefly describe the four basic expense categories used by the model.

Question 47

What are some of the sources multinationals can use to estimate goods and services prices worldwide as well as the differentials that may be necessary when sending expatriates to particular locations?

Question 48

How might cultural beliefs regarding the basis for compensation affect an approach to rewarding expatriates and host-country/third-country nationals in the same firm? How can a firm respond to these differences?