A Global Outlook on Executive Compensation: A Comparative Exploration

Abstract

The global arena has become the battleground for organizations to find executives with human capital that can thrust high performance goals. Using an exploration of the extant literature, this paper focused on executive compensation from three different regional perspectives: The United States, European Union member-states, and Chinese. The author Sought to inquire about the pay- for-performance incentives and to evaluate both similar and dissimilar compensation structures across the globe by using three exemplars. In the same light, discussed are the various elements included in compensation. Provided is review of global compensation structure, along with pay-for-performance as main enticement for global executives. Frankly, this comparative paper identified that not all compensation plans were tied to pay-for-performance, while some were overtly tied to pay for performance due to the structure of the organizational risk-aversion and economic structure. This paper provides comparative review of executive compensation in three geographical regions. Reference points used as exemplars in this document consist of the: European Union, United States, and China. These exemplars were chosen because they have majority presence in the open exchange markets, and they are, to degree, dissimilar in as far as legal, environmental, and social aspects. The significance of this paper is to explain the differences in compensation in an attempt to show the advantages and disadvantages of the varying compensation structures, globally. Also to explore the role of pay-for-performance linked to executive performance. The presented compensation structures are reflections of culture, organizational performance, and the creation of motivating incentives to increase employee performance. From theoretical perspective, this paper seeks to fill the gap in the literature proposed by Phillips and Fox (1989) who asked what is the impact of the compensation strategy on those most directly affected - employees (p. 474). Secondly, Garhart and Fang (2013) proposed there is, a second avenue of needed research is to more comprehensively define and measure PFIP (pay-for-performance) and study its consequences (p. 10). And finally, Cooper, Gulen, and Rau agreed that, There is surprisingly little research on this important (pay-for-performance) topic, given that current compensation should be linked to future performance if the correct incentive contracts are used, which is the main reason this paper foci is on pay-for-performance and compensation concepts but on global scale. This paper seeks to fill in the gaps in the literature by clearly outlining the European Union, China, and the US compensation strategy and, to show if the executive compensation plans are diverging or converging based on performance-to-pay initiatives. The first section of this paper examined the Chinese compensation structure. The second section addressed the European Union member-states structure of compensation, and the final section explored the US based form of compensating executives. At the end of this paper practical implication and conclusion of the comparative analyses of international executive compensation are provided.