Abstract
The paper commences by taking a look at executive pay positions in the United States. It looks at the various forms of compensation alongside basic salaries. These are then compared to other executives from outsourced companies around the world. It has been shown that US CEOs are the most highly paid.
On other hand, mid level and low level outsourced positions are dependent on the location of the individual. People in Japan, Switzerland, Germany and Denmark pay their mid level workers much higher than their US counterparts. However, outsourced jobs in developing Asian nations such as Vietnam and the Philippines are much lower than they are in the US.
Introduction
Compensation packages can easily be understood through an analysis of CEO pay as well as through an analysis of mid level job positions because the nature of their pay differs very substantially.
Executive pay
In the United States, executives can receive any of the following: a basic salary, some bonuses or incentives, some long term plans, compensation protection, perks and even employee benefits. Usually, some CEOs are given a basic salary alongside other kinds of short term incentives or bonuses.
In this regard, one may be entitled to some monetary compensation based on revenue growth or other types of incentives associated with the nature of one’s position. Sometimes, executives may be given a combination of their base salary alongside other forms of incentives that are largely calculated using formulas.
The difference between short term compensations and long term compensations is that the period under consideration varies. Long term incentives usually get measured for periods longer than one year. It is also possible for executives to be entitled to certain other perks like a limousine, health insurance packages, retirement plans, housing and access to loans with very low interest rates or no interest rates at all.
Alternatively, a person in an executive position may be entitled to stock options when the respective organization is interested in aligning stock price with interests of the said CEO. However, because of susceptibility to abuse by CEOs who may choose to artificially raise stock prices; most organizations may prefer putting a cap on the stock options available to their executives.
It should be noted that stock options are still preferable over cash compensation owing to recent historical events that attested to unethical accounting behavior i.e. the financial crisis of 2007 to 2009. Furthermore, stock options normally place executives at an advantage when it comes to taxation issues.
Some firms may also decide to offer some of their executives an opportunity to access stocks through the use of restricted stocks. These kinds of stock options are retained at the same value at which the executive purchased them during commencement of his or her term in office (Pizzigati & Anderson, 2009).
Certain firms may also protect their CEOs through the use of the golden parachute. This usually involves giving a guarantee to an executive concerning their jobs or salaries. Here, companies may decide to give them a fixed amount of money or salary regardless of whether the company has been taken over or business has come to a standstill.
Generally speaking, it can be argued that executive pay within the United States is much higher than it is in Asia or even Europe. Most executives in the US will be seen moving from company to company in search of even higher pay. This indicates that there is stiff competition to retain the talents of these seniors.
The US pay packages are in sharp contrast to those in Asian countries such as China. Here seniors are expected to stay loyal to their first employers thus putting them in positions where they have to contend with relatively modest pay (Lewin & Couto, 2008).
In order to fully understand the ramifications of these assertions, it is crucial to look at the actual figures earned by certain executives in the United States. This is highly dependent on the nature of the organization and the industry under consideration. In non profit organization, executives may receive relatively lower compensation than those in for-profit organizations.
The top executive in Partners health care system is $3,421,870 while the director of the Museum of modern art receives a compensation of $2, 710, 607. The president of Princeton University receives $2,091,425 while the one in University of Southern California gets $1,158,296. These were all figures released at the end of 2008 and may have risen to higher amounts by the end of 2010.
The figures dramatically alter when one studies the packages given to executives in for profit organizations. In a survey published by the wall street journal, concerning executive pay for the top 200 corporations in the United States, it was found that more than half these companies often pay their executives more than ten million in compensation.
The Texas instrument CEO is entitled to a compensation of 9.8 million dollars. IBM pays their CEO about 21.2 million while Exelon CEO gets approximately 12 million dollars in compensation.
It is these kinds of figures that illustrate the superior amounts of money earned by executives in the United States. In fact, the latter country is the first in the world followed by executives in the UK, then executives in Italy and New Zealand executive compensations.
A country such as China is widely known for its outsourcing abilities. In the past, it was frequently assumed that most US jobs taken to this nation were behind-the-scenes jobs; however this is no longer true today.
Chinese firms are now in charge of everything involved in creation of products including managerial functions. Executives in this nation are now a force to reckon with although the major difference between them and US based executives is that they earn much less. In some large companies such as Shangai Sun Tech, an executive will earn 200, 000 dollars which is a far cry from the millions that US based CEOs make.
Another company such as Trina Solar Ltd pays its executives about 128, 039 dollars. In the United States, an executive in a similar position would demand for a salary of approximately $ 1.1 million dollars. It should be noted that stock options are quite relevant to Chinese executives. Some of them may make a base salary of a relatively small amount but may grow their wealth through the use of stock options (Frydman, 2008).
Non executive or midlevel pay
Within the United sates, compensation packages mostly depend upon the kind of industry under consideration. Average employees located in the technology industry may be entitled to lucrative pay packages.
For example, a representative in a sales position may earn anywhere between twenty thousand dollars to one hundred and fifty thousand dollars in salary. On the other hand, a manager in this very field may be entitled to fifty to two hundred thousand dollars in compensation.
Mid level workers in US based companies are often entitled to other minimum requirements as well. Some may choose to include bonus features. For instance, stock options are becoming very common for members in this level.
Additionally, medical insurance, holiday incentives and pension plans are other things that employees within the United States must consider. In this regard, individuals may be earning a relatively low base salary but may benefit tremendously from all the other benefits that accompany their base salary (Ganesh, 2007).
Expatriates in mid level positions have an advantage over their counterparts in the United States. This is because of the high number of packages that will be offered as one relocates to such a nation. Because a US employee in another country will be required to leave his family and start a life in another country, most foreign companies will put this in mind.
They will offer a pay package that include school fees for one’s children in an international school so as to make the expatriate as comfortable as is reasonably possible. Medical coverage is also a guarantee in most expatriate positions because they are aware that this is the norm in the US. Some firms do provide drivers’ wages while others offer company vehicles or personal vehicles as well.
In the oil industry, it is common to find expatriates being entitled to housing allowances where the said individuals may be required to look for rental houses that fit the allowances granted to them.
These are all matters that would not be catered for inside the United States because it is always assumed that personal expenditures will be handled by the said individuals receiving the packages. These non salary benefits actually make the difference between choosing to work in a US based country or an external company.
It is usually debatable what foreign companies use to gauge the salary of an external worker. However, most of them will usually assess the salary range of that same individual in his or her country of origin. Usually, if these are multinationals, then it is quite easy to do so as such a firm may already possess a subsidiary firm in the US so it can easily compare the salaries.
However, companies that went outside of the US will not simply transfer figures from their US subsidiaries directly to their US employees in foreign nations. They will also look at the cost of living for these said individual while in that country. Additionally, they are likely to consider some insurance as well as taxation issues. These are all issues that would favor a US expatriate working in a foreign company (Behbahani, 2009).
On the contrary, the same may not be true for companies that relocated outside of the United States but are employing mostly local employees. Depending on the country under analysis, employees may not be given certain options that US based employees get. Things such stock options are debatable and may not arise in certain Asian countries.
Consequently, such firms may spend much less on employee salaries than other firms still based in the United States. According to local standards, employees in the outsourcing countries are benefiting from higher salaries relative to what other workers in different industries are earning (Manning, 2008).
The International Labor Organization explains that back office and call center jobs (which are the major outsourced jobs) are leading to higher pay among mid level and low level staff compared to those in other industries. In a country such as the Philippines, it has been shown that workers in these industries earn approximately fifty three percent more than average employees in that country.
Nonetheless, some of the other incentives associated with employment positions are not forthcoming in these kinds of jobs. For instance, call centre workers will often be paid in accordance with their performance. Alternatively, these individuals are often subjected to very difficult conditions such as electronic monitoring and the like. Additionally, they lack access to collective bargaining.
In a country such as China (where most manufacturing jobs were outsourcing in the nineteen nineties), it has been recorded that their workers get much less earnings than equivalent workers in the United States. In this case, the demand for engineers is quite high in China but surveys show that they earn about thirty to fifty percent of what engineers in US manufacturing plants do.
Even marketing managers in these firms earn about half of what their counterparts in the United States. In professional service industry jobs in China, one can find that a fresh graduate may be making about five hundred dollars monthly or 6, 000 dollars annually.
On the other hand, highly experienced individuals in China earn approximately five times this amount. In the United States, similar professionals would expect about 100, 000 dollars in compensation and this really makes them very exorbitant to hire.
The US compares relatively modestly when it comes to mid level jobs. Western Europe is known to be the highest paying in this area. Middle level positions such as IT management may attract a salary of about $161, 900 in Switzerland, $ 126, 700 in Germany and $ 116, 000 in Denmark.
Nonetheless, Hong Kong and Japan are still relatively high paying compared to the United States. In fact the former nations are the three highest paying countries in terms of mid level jobs for IT experts; the US comes in fourteenth. On the other hand other regions where outsourcing has been done like Asia may not report such high rates.
Within the IT sector, it has been shown that the lowest paying countries include India, Philippines and Vietnam in that order. Managers in these industries will earn 26, 500 dollars, 20, 700 and 20, 100 dollars respectively. It should be noted that this is total pay including any bonuses/ perks awarded during the course of employment (Lang et. Al, 2010)
Conclusion
Executives in the United States are some of the highest paid in the world. On the other hand, mid level positions are not as high paying as they are in Western Europe. The US pays much more to its mid level employees than Asian based companies although these amounts are dependent on the nature of the industry and are much higher in outsourced jobs than non outsourced jobs in those countries.
References
Lang, M., Dusch, T. & Dietl, H. (2010). Executive salary caps. Zurich university working paper, 129
Pizzigati, S. & Anderson, S. (2009). CEO pay debate: facts and myths. Institute for policy studies, 45
Frydman, C. (2008). Trends in executive compensation. Economic studies center, 45
Manning, P. (2008). The global sourcing of engineering and science talent. Academy of management perspectives, 22(3), 35-54
Ganesh, S. (2007). Outsourcing as symptomatic: ethnic scapegoating in the US IT sector. Communication management journal, 11(1), 71-83
Lewin, A. & Couto, V. (2008), Next generation off shoring. Offshoring research network report, 78
Behbahani, A., Calcagno, J. & Mojtahedian, S. (2009). Is it virtuous to be virtual? Nature biotechnology, 27(10), 9