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Compensation issues and practices have presented U.S. multinational enterprises (MNEs) with major challenges in recent years. This includes almost all firms of any size today because they have foreign sales, operate in more than one country, and/or have a diverse nationality mix of managers and owners. In other words, the global economy has arrived, and U.S. MNEs are or must become major players.
Some of the reasons for going international include the following:
* The appearance of new regional market opportunities, such as in Eastern Europe.
* The rapidly growing economies in the Pacific Rim, especially in Southeast Asia.
* The rise in international protectionism in many countries around the world. By establishing local operations, U.S. MNEs can avoid costly import tariffs and quotas.
* The need to keep an eye on the competition. The MNEs recognize the need to keep abreast of the activities of their major competition and to be able to respond forcefully and quickly. By having a presence in their competitors' home countries, U.S. MNEs can deny their competitors a safe haven from which to launch competitive strikes into other national economies.
* The desire for profits. The "bottom-line" reason U.S. firms go international is to boost profits. For example, in recent years the big MNEs, such as Exxon, Ford, General Motors, IBM, and Mobil, have earned the majority of their profits from overseas investments.
The trend toward globalization poses new human resources (HR) management issues for employers. Since more and more employees are U.S. expatriate--U.S. citizens who work for MNEs in a foreign country--or "expats," a major challenge will be to motivate and manage expatriate managers.
Research and experience show that when U.S. MNEs establish an overseas foothold, they usually assign their own managerial teams (expats) to run the unit. There are several reasons for the use of expats--the MNE may be operating in unfamiliar territory and prefer to have its own people on-site; it typically considers its own people more trustworthy and more likely to respond to home office directives than are local managers; and management would prefer that failures be a result of poor decisions made on its own part rather than on the part of locally hired people.
After the operation is up and U.S. MNEs commonly...