International Compensation

• In USA - Compensation package includes: base

salary, bonus, long term incentives & other
benefits and perks. The base salary is the small part
of the total package.

• In Europe – Pay less compensation than that of

American executives, but benefits and Employee
perks are much better in Europe than America.

• In Japan – The compensation levels of CEO’s of

large companies are just one-third of those of
American CEO’s. Japanese compensation is based
on seniority of employees.
• A Chinese manager with 15 years experience costs less than
USD 70,000 per annum, A US expatriate manager with
corresponding expertise would cost his or her organization
USD 300,000 per year

• Average wage of Chinese worker is only about 3-5% of that of

the U.S. worker.

• Vacation time is not important in benefit to Japanese worker,

they take off 3- 4 days off in a Year. However Vacation and
holidays are important in AFRICA, AMERICA and Asian
countries.

• In European countries , efforts are progressing to establish

EUROPAY, by which member nations would develop common
policies regarding compensation practices.
 International Compensation
• International compensation refers to all forms
of financial returns and tangible benefits that
employees of an international organization
receive from their employer in exchange for
providing their labor and commitment.
• Almost all the employees accept jobs in MNC’s
take-up assignments in various countries, &
take-up the risk, bear inconveniences &
discomforts in foreign assignments mostly
based on the compensation package.
Employee Expectations and International Organization’s
Compensation Policy

– Financial protection in terms of benefits, social security and cost of

living in the foreign location

– Foreign assignment offers opportunities for advancement through

income and/or savings

– Issues such as housing, education of the children and recreation are

addressed
 Varying Exchange Rate
Requirements Varying Tax
Fluctuations
for Facilities Rates

Varying Cost of Complexities of

Living Varying
International
Inflation Rate
Compensation
Management

Employee Varying Local

Expectations Conditions

Consistency & Country

Equity Perspectives
 Factors affecting international compensation

• Social Context : different countries have different ideas,

they think differently about government, employers,
employees.
• Culture: People with different cultural background view
compensation system differently.
• Trade union: European countries are highly unionized
while Asian countries are less unionized.
• Ownership and capital market: ownership and financing
of companies are dramatically different around the
world. Hence compensation strategies are influenced .
Executive Compensation
 Executive Compensation
• Executive compensation, also known as
executive pay, refers to remuneration
packages specifically designed for business
leaders, senior management and executive-
level employees of a company.
• Executive compensation includes benefits
such as salaries, perks, incentives, insurances
etc.
 Components of executive compensation

1. Salary
2. Short Term Incentives (STI)
3. Long Term Incentives (LTI)
4. Guaranteed Severance Package
5. Perquisites – like club memberships, private
planes
6. Insurance – health insurance for self and
dependents
 Case example…
• Incentives can drive explosive growth and innovation.

Apple under Steve Jobs made good on the iconic leader’s

commitment to making a “dent in the universe.” The
corporation achieved its explosive growth—fueled by a steady
stream of innovative, game-changing products including the
iPod, iPhone, and iPad—in part by using generous stock options
to motivate executives and other employees to create value.
The incentive system rewarded not specific financial results but
value created by filling unmet consumer needs.

Apple’s executives were expected to make big sacrifices, and

they did so more willingly because of the incentive system in
place
Apple CEO Tim Cook's salary doubled in 2014.

• Apple CEO Tim Cook got a fat cash bonus that brought
his total compensation to $9.2 million in 2013. That's
more than double what he received in the previous year
(2013), as the company enjoyed a upsurge in sales and
profit fuelled by the popularity of its new, oversized
iPhone 6 models.

• Cook's pay for fiscal 2014 included $1.7 million in salary

and $6.7 million in incentive pay that was awarded by
Apple's board after he beat the performance goals that
directors had set for him, according to a regulatory filing.
 Executive Compensation
• Salary: Most executive compensation plans include a
fixed yearly salary, also known as a base salary.
Companies often pay this throughout the year in
monthly or bimonthly amounts.
• Benefits: Executives may receive benefits including
health insurance, life insurance and severance pay.
Benefits may also include a variety of paid time off
(PTO), including vacation time, holidays, sick days or
bereavement days.
• Bonuses: Also known as "performance-based annual
incentives" or "incentives," bonuses are extra, non fixed
sums of money added to the salary in a given year.
 Executive Compensation
• Stock options: Employee stock options, or ESOs, are a
form of compensation wherein an employee has the
option to purchase company stock at a reduced price
within a given timeframe.
• Performance shares: Performance shares are stocks that
are only available to executives if the company reaches a
certain benchmark of success. These can help motivate
executives to do their jobs well.
• Perquisites: These are special rights and privileges that
an executive may receive as part of their compensation
plan. Examples include club memberships or access to a
private jet.
Importance of Executive compensation

• An improperly compensated executive can

cost shareholders money and can produce an
executive who lacks the incentive to increase
profits and boost the share price. 
• Executives are the ones taking decisions and
making the strategies, hence their
compensation needs attention.
Thank You!