remain in the assignment favour localization, only 27 per cent of respondents to
their 2000 survey have a compensation policy that is localized at either the regional
or host country level. A similar minority pursuing localization was identified in
the most recent survey of 70,000 mobile workers in 276 companies by
PricewaterhouseCoopers, with only 13 per cent considering the local market when
determining salaries for expatriates on long-term assignments (Pricewaterhouse-
Coopers, 2002). Of course, these approaches, including the Balance Sheet
approach, have many variations and degrees. Overall, conservative and traditional
models dominate compensation for international assignments, and enduring
problems such as inequities between parent country national, third country
national and host country national executive compensation, and the compensa-
tion legacy, or adherence to outmoded and irrelevant practices, have been identified
(Harvey, 1993). The above section has focused on compensation for international
staff transfers and issues related to it. The next section takes a broader view to con-
sider issues with international compensation as a whole.
International compensation and the
role of national cultureAs shown in Figure 12.1, local national culture was identified as an external vari-
able influencing international compensation strategy. While international com-
pensation research and practice is extending beyond expatriate and executive
compensation, debate about the influence of national culture on international
compensation strategy and implementation endures. Consider, for example, the
egalitarian compensation approach that the Managing Director of Zotefoam
intends to transfer to his international operations. He does not see this as a bar-
rier to international expansion into the USA and given that the cultural dis-
tance, or degree of cultural difference, between the UK and the USA is relatively
small, his view might prevail. Proponents of a culture-free approach to compen-
sation (see for example, Milkovich and Bloom, 1998) would argue that a standard,
yet flexible, international compensation strategy could be universally applied
with some modification in, say, defining an egalitarian organization across
cultures. However, others would argue that cultural differences warrant different
international compensation strategies ( Harvey, 1993).
While recognizing the importance of cultural values in determining com-
pensation, Bradley et al. (1999) suggest that, in addition to cultural similarities
and differences, industry and corporate effects must also be included in deter-
mining whether or not a global compensation system is feasible. Compatible
with this suggestion is the notion of strategic flexibility, an emerging trend in
international compensation. This means focusing on leveraging national dif-
ferences, developing MNC organizational culture and on managing multiple
compensation deals. In effect, the strategic flexibility approach reflects
Sparrow’s (1999) caution against cultural determinism, and that international
316 International Human Resource Management