Globalization has many different effects on the world, the nations within it, and the individual organizations and people that populate these nations. Many of the effects and challenges of globalization work in indirect ways, and these are the effects that are quite often areas of ethical concern when it comes to international business, however there are also many direct considerations that businesses must take into account when they are globalizing or engaging in any multinational/international endeavors. The day-to-day operations and the minute details of international business have immense legal and ethical implications that extend well beyond simply trying to conduct business in a way that benefits all organizations and nations involved. Careful consideration of even the most innocuous-seeming of business actions and transactions renders these complications strikingly clear.
Compensation for employees relocated to a foreign country is one of the issues that presents complications when businesses engage in international operations. Not only must the compensation provided remain ethically fair and usually legally compliant with the compensation provided to domestic employees and the locality in which the company is based, but the laws and ethical constraints or requirements on compensation pertaining to the country(ies) to which employees are relocated must also be carefully followed. In addition, the fact that an employee and potentially their family will have to leave their native country and all of the people and places they know warrants some extra consideration.
For Riordan and Robert Lord, this means developing a clear and comprehensive understanding of Japanese labor laws and labor relations as well as taking into account the general principles and practices of the company when determining a compensation plan for the expatriate. Japanese labor laws and labor relations vary markedly from the United States in certain respects, and maintaining consistency with Riordan's internal plans while maintaining compliance with all other requirements can be difficult. The following pages present an overview of certain relevant issues in this situation, with the implications of these situations for Robert Lord and for Riordan in terms of their responsibilities and their rights. What this means in terms of the general context of the Japanese economy and that nation's basic view of labor, labor unions, and proper compensation are also given consideration.
Comparison with Japanese Average Salary
Robert Lord receives a salary of $140,000 in the United States, in addition to the other standard benefits that Riordan gives its employees: health and dental insurance, life insurance, paid vacations and holidays (including an extra annual return visit to the United States for foreign-relocated employees that is not part of normal vacation time), and a 401(k) plan with company matching contributions (Case, n.d.). Riordan also offers a housing allowance to foreign employees and a salary bonus of 25% of the base pay, meaning Robert Lord's salary would increase by $35,000 to $175,000, before any additional bonuses or the significant benefits provided are taken into consideration (Case, n.d.).
In order to determine if this compensation is equitable when compared to Japanese requirements and standards, it is necessary not only to determine the average salary for a comparable age and seniority level in Japan, but the benefits packages and expectations that are part of Japanese compensation plans must also be examined. According to the information currently available, a salary of $175,000 is higher than the average salary of workers/managers with more than twenty years of seniority at their companies or industries in Japan, and thus on an initial comparison it would appear that Lord is being compensated at a higher rate than a comparable Japanese individual or position (Average Salary Survey, 2012). This is equitable, given the fact that Lord is being asked to relocate to a foreign country and the average Japanese salary is (obviously) based primarily on the salaries of those living the Japan as their native country, and indeed the added compensation Lord will receive puts him about 25% higher than would be expected in Japan for a supervisor of his seniority -- in keeping with Riordan's foreign compensation principles (Average Salary Survey, 2012; Case, n.d.).
The case of benefits is somewhat more complex, as these cannot always be compared directly nor would it necessarily be reasonable to do so. The economic situation in Japan makes certain benefits programs offered to Japanese workers very shaky, and at the same time there is somewhat less company responsibility for certain areas of benefit provision (Seeman, 2004). Overall, Lord's benefits will not put him drastically out of step with the Japanese or with individuals holding similar U.S.-based Riordan positions, but each must be discussed separately.
Like most developed countries outside the United States, Japan offers a "universal" healthcare system as part of a comprehensive system of social insurance, which also includes worker's compensation-type programs and other government-mandated and tax- or fee-funded programs (Seeman, 2004). The cost structure of providing health and dental insurance might change for Riordan, then, but the relative value of these benefits would remain the same. Japan also has a national pension system as well as private options, however most of these are struggling under an aging Japanese population and ongoing economic shrinkage (Seeman, 2004). There is no reason Lord should not be able to keep his current 401(k), and while this would make his compensation somewhat out of step with Japanese counterparts anything else would be an effective reduction in compensation. Finally, the housing allowance that Lord will receive does put him in a somewhat enviable position in relation to similar Japanese supervisors, as housing can be quite expensive in Japan, however the requirement of foreign relocation is again worth some extra consideration.
In sum, Lord would receive direct salary approximately 25% higher than a comparable Japanese national, and would also see higher benefits in terms of his pension plan and a drastic reduction in his cost of living (as a result of the housing allowance). This is not entirely equitable with the costs an average Japanese national would incur, especially when it comes to housing, however the Japanese national is afforded the comfort of living in their native country, in proximity to their family and friends. This trade-off makes Lord's compensation quite equitable.
Pay Difference in the United States
From the information provided in the case, Lord's exact compensation in the coming year(s) cannot be calculated, as his performance review and the base percentage or cash amount available for raises is not provided (Case, n.d.). He would almost certainly be receiving the top raises and bonuses available, however -- if he has been selected as a Director of Plant Operations for an overseas facility it is reasonable to assume that his performance review would have been "exceeds expectations" -- and thus his $140,000 salary would have been increased at least some degree in the coming years (Case, n.d.). A five-percent raise, which is really only a two-percent raise given standard three-percent inflation, would increase his salary to $147,000; a ten-percent (effective seven-percent) raise would lead to a salary of $154,000 (Case, n.d.). Because Riordan also explicitly strives to individualize compensation in a manner that is truly performance-based and works to not only retain but encourage top talent, it is very reasonable to assume that Lord would have been given a significant bonus or other consideration if moved to a similar position in the United States (Case, n.d.).
Even after taking all of this into account, it is clear that Lord's compensation after relocation to Japan is still significantly higher than if he were to remain in the United States. The added salary and housing compensation would almost certainly make this an enviable position for most people at Riordan. As both compensation for leaving his native country and as an explicit reward for a job well done (in keeping with Riordan's policies), however, this is still equitable compensation.
Influence of Trade Unions on Compensation and Social Contract Perception
Japanese culture and values are markedly different form those of the United States and the West generally, and this has numerous significant implications on the general atmosphere of labor relations in the country and on the impact that labor unions have had. Unions are perceived differently and indeed function differently in Japan when compared to the United States, and general social concerns as well as already-present views of the social contract between employers and employees means unions had, in many respects, less ground to cover than in the United States U.S. LOC, 2012; Sidorenko, 1999). Despite all of this, union membership in Japan is quite even though numbers have been declining in more recent years (in keeping with an international trend), and thus an examination of their influence in the country is important in making sure Lord's compensation will be viewed as equitable.
Unions came to power in Japan during roughly the same period as they did in the United States, with true union strength emerging in the 1940s after the close of the war (U.S. LCO, 2012). Certain large-scale goals involving working conditions and minimum wages…