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Multinational Companies’ Global Compensation Practices Case Study


From this scenario and your reading, what are some of the biggest chal-lenges faced by MNCs in their global compensation practices?

MNCs face several challenges in the process of compensating its diverse workforce. The rate of compensation of different employees is one of the major challenges that these firms first. Given the market trend, these firms find it difficult to develop an effective compensation strategy that will ensure that employees of a specific level are compensated to a certain level. There are those firms that have a standard rate of pay for all employees of a given rank.

At the same time, there are those firms whose remuneration is determined by the market forces of the host nation. Another challenge that MNCs face is the strategy that they will use to compensate host country nationals (HNCs), parent country nationals (PCNs), and third-country nationals (citation).

Compensation systems of an MNC must be in line with the remuneration policies and procedures of the host nation, the policies of the MNC itself, and most importantly, they have to consider factors such as employee motivation. Given these factors, therefore, it is always challenging for MNCs to come up with effective compensation strategies that conform to the needs and requirements of their employees, the host nation, and the firm at large.

What are particular global compensation challenges encountered in the process of implementing successful international mergers?

The organizations that are operating in the modern world are in a constant state of competition with rival firms that produce relatively similar products. Thus, to stand at a competitive edge, firms usually come up with policies and strategies to outcompete their rivals such as mergers and acquisitions. Despite the success that a firm might enjoy from a merger, compensation challenges are usually experienced. For instance, the level and structure of the compensation packages that the employees at the executive level enjoy might be relatively different.

If this situation is not handled effectively and professionally, it might result affect the incentives that would have otherwise accrued from the merger. Consequently, the management might become reluctant to monitor the operations of the firm and to undertake renovations to increase the overall productivity of the venture. As a result, a conflict between managers is usually inevitable due to their different compensation packages hence affecting the overall operation of the venture.

What are major areas of convergence in global compensation, and what are forces that are driving this convergence?

To ensure that a merger is successful, the involved parties need to come up with an effective compensation strategy for the executive as well as the employees. With such a system in place, the merger will develop a strong corporate value that will result in its success in the short run and the long run. A stock option is one of the main areas of convergence. A stock option gives the executive the right to purchase stocks of the firm at a future date. This right greatly increases their income. A golden parachute is also another major area of global convergence. This option guarantees the executive reasonable send-off packages in an event whereby they are terminated from their duties. These packages thus act as compensation for the work they have put into the firm.

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IvyPanda. (2021, January 13). Multinational Companies' Global Compensation Practices. Retrieved from https://ivypanda.com/essays/multinational-companies-global-compensation-practices/

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"Multinational Companies' Global Compensation Practices." IvyPanda, 13 Jan. 2021, ivypanda.com/essays/multinational-companies-global-compensation-practices/.

1. IvyPanda. "Multinational Companies' Global Compensation Practices." January 13, 2021. https://ivypanda.com/essays/multinational-companies-global-compensation-practices/.


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IvyPanda. "Multinational Companies' Global Compensation Practices." January 13, 2021. https://ivypanda.com/essays/multinational-companies-global-compensation-practices/.

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IvyPanda. 2021. "Multinational Companies' Global Compensation Practices." January 13, 2021. https://ivypanda.com/essays/multinational-companies-global-compensation-practices/.

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IvyPanda. (2021) 'Multinational Companies' Global Compensation Practices'. 13 January.

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