Sustainable expatriate compensation in an uncertain environment

Abstract

This study examines an important area of strategic global human resource management - expatriate managers' compensation in times of global business uncertainty. While expatriation has numerous well-documented benefits for multinational corporations (MNCs), it is incredibly costly. In consequence, when global business conditions become uncertain, the expatriate program in MNCs is typically one of the first budget centres to be targeted for cost savings. The MNC typically radically restructures expatriate remuneration. The resultant effect of these actions is a negative impact on the relationship between the expatriate and the MNC, ultimately reducing expatriate performance and thereby abating the many advantages that the expatriate program brings to MNCs. Social Exchange Theory and Real Options theory help to provide a theoretical framework to understand how expatriate compensation decisions can help to create a desirable sustainable expatriate program in MNCs.