Global Human Resource Management

&Accounting in the

International Business

組員：劉倚帆。周珈慶。張詩卿。詹新韡。王振宇

Human Resource Management

• HRM ： Refers to the activities an organization carries out to use its human resources effectively.

• Four major tasks of HRM – Staffing policy

– Management training and development

– Performance appraisal

– Compensation policy

The Strategic Role of International HRM

• In this chapter we will see that success also requires HRM policies to be congruent with the firm’s strategy.

• For example, a transnational strategy imposes different requirements for staffing, management development, and compensation practices than a localization strategy.

The Role Of Human Resource in Shaping Organization Architecture

Staffing Policy

• Staffing policy– Selecting individuals with requisite skills to do a

particular job

– Tool for developing and promoting corporate culture

• Types of Staffing Policy– Ethnocentric

– Polycentric

– Geocentric

Ethnocentric Staffing Policy

• A ethnocentric staffing policy is one in which all key management positions filled by parent-country nationals.

• Ex ： Japanese & South Korean firms

Ethnocentric Staffing Policy

• Advantages:– Overcomes lack of qualified managers in host nation

– Unified culture

– Helps transfer core competencies

• Disadvantages:– Limits advancement opportunities for host-country

nationals.

– Cultural myopia

• Ex ： Mitsubishi Motors

Polycentric Staffing Policy

• A polycentric staffing policy recruits host-country nationals to manage subsidiaries while parent-company nationals occupy key positions at corporate headquarters.

• Ex：台灣佳企電子 Mcdonald’s

Polycentric Staffing Policy

• Advantages:– Alleviates cultural myopia

– Inexpensive to implement

• Disadvantages:– Limits opportunity to gain experience of host country

nationals outside their own country

– Can create gap between home and host country operations

– Federation

• Ex ： Unilever

Geocentric Staffing Policy

• A geocentric staffing policy seeks the best people for key jobs throughout the organization, regardless of nationality.

• Ex ：花王

Geocentric Staffing Policy

• Advantages:– Enables the firm to make best use of its human

resources

– Equips executives to work in a number of cultures

– Helps build strong unifying culture and informal management network

• Disadvantages:– National immigration policies may limit implementation

– Expensive to implement due to training and relocation

– Compensation structure can be a problem

Comparison of Staffing Approaches

Expatriate Managers

• Expatriate: citizens of one country working in another.– Ethnocentric policy ： the expatriates are all home

country nationals who transferred abroad.

– Geocentric policy ： the expatriates need not be home country nationals ； the firm does not base transfer decisions on nationality.

• Inpatrites: expatriates who are citizens of a foreign country working in the home country of their multinational employer– Ex ： Acer

Expatriate failure

• Expatriate failure: premature return of the expatriate manager to his/her home country

Reasons for Expatriate Failure

US multinationals

Inability of spouse to adjustManager’s inability to adjustOther family problemsManager’s personal or emotional immaturityInability to cope with larger overseas responsibilities

European multinationals

Inability of spouse to adjust

Japanese Firms

Inability to cope with larger overseas responsibilitiesDifficulties with the new environmentPersonal or emotional problemsLack of technical competenceInability of spouse to adjust

Expatriate Selection

• Reduce expatriate failure rates by improving selection procedures.

• An executive’s domestic performance does not (necessarily) equate to his/her overseas performance potential.

• Employees need to be selected not solely on technical expertise, but also on cross-cultural fluency .

Four Attributes that Predict Success

Self-OrientationPossessing high self-esteem, self-confidence and mental well-being

Others-Orientation

Ability to develop relationships with host country nationals Willingness to communicate

Perceptual Ability

The ability to understand why people of other countries behave the way they doBeing nonjudgmental and flexible in management style

Cultural ToughnessRelationship between country of assignment and the expatriate’s adjustment to it

Training and Management Development

• Lesson

Training of expatriates

A Well-designed

lesson

Expatriates success

Training of expatriates

• Development

Training of expatriates

• Training and development– Global competition– Cross-company

TRAINING DEVELOPMENT

Training of expatriates

• Reasons of failure– Expatriate not adapted to the environment– Family

• Solution training– Cultural training– Language training– Practice training

Training of expatriates

• Cultural training– Increasing the familiarity to the environment– Ease the conflict between the different cultural

• Language training– English maybe not the only– New language helps a lot

Training of expatriates

• Practice training– Life style– Expatriate group

Repatriation

• Problems – Where?– What?

• Issue – the first or the last process?

Management development and strategy

• Development programs designed to increase the overall skill levels of managers through:– Ongoing management education– Rotation of managers through a number of jobs

within the firm to give broad range of experiences

• Ends – Integration performance

Performance appraisal

Appraisal

• Problems– Bias

• Host country

• Home country

• Guideline– Reduce the bias that caused by different cultural

misunderstanding

Compensation

Compensation

• Issues– Pay executives in different countries according

to the standards in each country or equalize pay on a global basis

– Method of payment

Compensation in Various Countries

Expatriate Pay

• Typically use balance sheet approach– Equalizes purchasing power to maintain same

standard of living across countries – Provides financial incentives to offset

qualitative differences between assignment locations

The Balance Sheet Approach

Components of Expatriate Pay

• Base Salary– Same range as a similar position in the home country

• Foreign service premium– Extra pay for work outside country of origin

• Allowances– Hardship, housing, cost-of-living, and education

allowances• Taxation

– Firm pays expatriate’s income tax in the host country• Benefits

– Level of medical and pension benefits identical overseas

International Labor Relations

International labor relations

• Key Issue– Degree to which organized labor can limit the

choices of an international business

• Aims to foster harmony and minimize conflicts between firms and organized labor– Concerns of Organized Labor

– Strategy of Organized Labor

– Relationship between firms and organized labor

Concerns of organized labor

• Better fees, safety and conditions

• Bargaining power

• Attempts to import employment practices and contractual agreements from multinational’s home country

Strategy of organized labor

• Attempts to establish international labor organizations

• Lobby for national legislation to restrict multinationals

• Attempts to achieve international regulations on multinationals through such organizations as the United Nations

Relationship between firms and organized labor• Centralization vs. decentralization

國際企業會計

Accounting in the International Business

Introduction

1. the language of business

2. International business are confronted with a number of accounting problems that do not confront purely domestic business.

3. IASB

International Accounting Standards Board

Country Differences in Accounting Standards

1. Different countries have different accounting systems.

2. In many European countries , government regulations require firms to publish detailed information about their training and employment policies .

Factors influence the development of a country’s accounting system

① The relationship between business and the providers of capital.

② Political and economic ties with other countries.

③ The level of inflation.

④ The level of a country’s economic development.

⑤ The prevailing culture in a country.

Relationship Between Business and Providers of capital

1) United States and the Great Britain Both have well-developed stock and bond markets.

2) Switzerland, Germany, and Japan, a few large banks satisfy most of the capital needs of business enterprises.

Political and economic ties with other countries

1) The U.S. system has influenced accounting practices in Canada and Mexico, and since passage of NAFTA.

2) The accounting systems of EU members such as Great Britain, Germany, and France have been quite different, but under EU rules, they are now converging on IASB norms.

Inflation Accounting

1) Many countries accounting is based on the historic cost principle.

2) If inflation is high, the historic cost principle underestimates a firm’s assets.

3) 1980 current cost accounting

Level of Development

1) Developed nations tend to have large, complex organizations.

2) Accounting problems are far more difficult than those of small organizations.

CULTURE

Uncertainty avoidance refers to the extent to which cultures socialize their members to accept ambiguous situations and tolerate uncertainty.

case

• Enron~ The Smartest Guys in The Room 安隆企業破產案是美國華爾街史上最大的商業醜聞。造成員工失業、員工領不到退休金，也造成投資人血本無歸等諸多問題。

安隆企業曾是美國第七大企業，掌握能源及電力的未來價格。

跨國企業與其查核會計公司間的假帳密謀。全球五大會計師事務所之一的亞瑟安達信被美國證期會吊銷執照。

National and International Standards

• Accounting standards– Rules for preparing financial statements

• Auditing standards– Rules for performing an audit

Lack of Comparability

• National differences in accounting and auditing standards– R&D costs (U.S. & Spain)– Depreciation (German & British)

• Gross profit of $1.5 million, net profit of – $34,000 in the U.S.– $260,600 in Britain– $240,600 in Australia

Lack of Comparability

• Transnational financing– Raise capital for the sale of stocks or bonds in

another country

• Transnational investment– Invest in stocks or bonds of a firm in another

country

Lack of Comparability

• Transnational financial reporting– Lack of comparability between accounting

standards in different national can lead to confusion

• Financial position looks significantly different

• Have difficulty identifying the firm’s true worth

International Standards

• Companies raise money from providers outside national borders

• Providers are demanding consistency in financial results

• Facilitate the development of global capital markets

International Standards

• International Accounting Standards Board (IASB)– International Accounting

Standards Committee (IASC)

– To issue a new standard, 75% of the 14 members must agree.

• Financial Accounting Standards Board (FASB)– Writes generally

accepted accounting principles (GAAP)

International Standards

• Under an agreement reached in 2002, IASB and FASB will increasingly work together

• IASB– Develop accounting standards for firms seeking stock

listings in global markets

• FASB– Join force with accounting standard steers in Canada,

Mexico, and Chile

《國際金融》外國公司在美上市， 2007年財報開始不須兩本帳

• 美國放寬在美上市外國公司會計法規，從二○○七年的財報開始，使用國際會計標準的外國公司將不再需要調整他們的財報以符合美國會計法規。分析師指出，此一調整有助提高外國公司申請在美國上市的意願。

• 此舉將使倫敦的國際會計標準理事會所認可的會計標準，更加順暢地在國際間通行。

2007/11/17 14:54 時報資訊

• Adopt of IASC accounting principles in the 1990’s– Increase interest by foreign investors

• 1994 financial statements in accordance with IASC guidelines and restarted its 1992 results

• In 2000, attract U.S. investors• In 2002, adopt full U.S. accounting

principles in addition to IASB principles

Multinational Consolidated Financial Statements

• Economically, all the companies in a corporate group are interdependent

• Only assets, liabilities, revenues, and expenses with external third parties are shown in consolidated financial statements

• Required to keep own accounting records and financial statements

• *Subsidiary owes parent $300• **Subsidiary pays parent $1,000 in royalties for products licensed from parent.

Parent Foreign Subsidiary

Cash $1,000 $250

Receivables 3,000* 900

Payables 300 500*

Revenues 7,000** 5,000

Expenses 2,000 3,000**

• *Subsidiary owes parent $300• **Subsidiary pays parent $1,000 in royalties for products licensed from parent.

Eliminations

Parent Subsidiary Debit Credit Consolidated

Cash $1,000 $250 $1,250

Receivables 3,000* 900 $300 3,600

Payables 300 500* $300 500

Revenues 7,000** 5,000 1,000 11,000

Expenses 2,000 3,000** 1,000 4,000

Currency Translation

Foreign subsidiaries will prepare their financial

statements in the currency of their locating country

When multinational prepares consolidated accounts it must

convert all statements into the currency of its home country

The Current Rate Method

The Temporal Method

The Current Rate Method

• We use current exchange rate to consolidate financial statements ， it is incompatible with the historic cost principle although this may seem logical.

• For example ：

假設 1999年台幣比日幣為 1 ： 4

假設 2007年台幣比日幣為 1 ： 3

The Temporal Method

• The Temporal Method translates assets valued in a foreign currency into the home-country currency using the exchange rate that exists when the assets are purchased.

• There is a problem in Temporal Method…

Ex ： exchange rate seldom remain stable for long (Japan&U.S.)

Balance sheet America’s Japanese subsidiary January 1, 2004

Yen Exchange Rate U.S. Dollars

Cash 10000000 1:100( 美元比日幣 ) 100000

Owners’ equity 10000000 1:100( 美元比日幣 ) 100000

Balance sheet America’s Japanese subsidiary March 1, 2004

Yen Exchange Rate U.S. Dollars

Fixed assets 5000000 1 ： 95( 美元比日幣 ) 52632

Inventory 5000000 1 ： 90( 美元比日幣 ) 55556

Total 10000000 108188

Owners’ equity 10000000 1 ： 100( 美元比日幣 ) 100000

+8188

Current U.S. Practice

No.1 U.S. based multinational firms must follow the requirements of Statement 52 ， which issued by the FASB in 1981

No.2

No.3

Foreign subsidiary

Self-sustaining 、 autonomous

Integral to the activities of the parent company

Self-sustaining 、 autonomous

Integral to the activities of the parent company

Functional currency ：local currency

Functional currency ：U.S. currency

Accounting Aspects of Control Systems 1/2

• There are three main steps for corporate headquarter to control subunits ：

Head office and subunit management jointly determine subunit goal for the coming year

Throughout the year ， the head office monitors subunit performance against the agreed goals

If a subunit fails to achieve its goals ， the head office intervenes in the subunit to learn why the shortfall

occurred ， taking corrective action when appropriate

Accounting Aspects of Control Systems 2/2

• Accounting System plays an important role in measuring subunits’ performance

• Usually headquarters and subunit managers discuss new budget for next year.

(Using AIS examined)

• The most important to evaluate subunits’ performance is the subsidiary’s actual profits compared to budgeted profits

Exchange Rate Changes and Control SystemsThe Lessard-Lorange Model

• To deal with exchange rate problems ， Lessard and Lorange point out three exchange rates ：

The Initial Ratethe spot exchange rate

when the budget is adopted

The Projected RateThe spot exchange rate

Forecast for the end of the budget period

The Ending Ratethe spot exchange rateWhen the budget and

performance are being compared

Initial (I) Projected (P) Ending (E)

(I)

(P)

(E)

Rate Used Translate Actual Performance for Comparison with Budget

Rate Used for Translating Budget

Budget at initialActual at initial

Budget at initialActual at projected

Budget at initial Actual at ending

Budget at projectedActual at initial

Budget at endingActual at initial

Budget at endingActual at projected

Budget at endingActual at ending

Budget at projectedActual at ending

Budget at projectedActual at projected

Transfer Pricing

• A product (including service) might be designed in one country ， some of it components manufactured in a second country ， and then sold worldwide.

• The price at which such products or services transferred is referred to as the transfer price

(Ex ： A French subsidiary of U.S. parent)

Case-transfer pricing in China

No.1 大陸運輸業隨著石油價格上漲，運輸成本逐漸攀升

No.2 運輸會決定向付貨人提出每一公里增加一元的燃料加油費，成本隨之上升

No.3 成本逐漸上升，迫使許多人放棄從事運輸業工作

隱藏意涵

當運輸業者成本提高，價格亦會提高，其中子公司間的貨物移轉價格相對上升

A French subsidiary of U.S. parent

Before Change After 20 Percent

in Transfer Price Increase in Transfer Price

Revenues per unit ＄ 230 230

Cost of component per unit 100 120

Other costs per unit 100 100

Profit per unit ＄ 30 10

Separation of subsidiary & Manager Performance

Subsidiary’s performance return of investment

other indicators of profitability

Manager’s performance Managers will have different performance according to different environment (ex ：economic 、 political 、 social conditions ) ， thus we can not evaluate them as the same with subsidiary’s performance

For example ： manager of a subsidiary in an adverse environment that has an ROI of 5 percent may be better than the manager of a subsidiary in a benign environment that has an ROI of 20 percent

Suggest ： we suggest that when we evaluate a subsidiary and manager’s performance ， we have to separate them because of different environment

Q&A

• 外派人員失敗最主要的原因為何 ?

• 全球兩大會計標準為何 ?

• 國際企業會計提到的個案例子公司為哪一個 ?

Thank you for your attention!!