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Cross-Cultural Equity Issues: US Citigroup Expatriates in China. By Team #3: Jason Lim Calvin Mak Yao Ting Ni Hsien-Fang (Fiona) Wu Taojune (Simon) Cheng. Presentation Overview. Fiona – Planning and Strategy Calvin – Approaches to Compensation Yao – Pay Gaps and Compensation

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cross cultural equity issues us citigroup expatriates in china

Cross-Cultural Equity Issues:US Citigroup Expatriates in China

By Team #3:

Jason Lim

Calvin Mak

Yao Ting Ni

Hsien-Fang (Fiona) Wu

Taojune (Simon) Cheng

presentation overview
Presentation Overview
  • Fiona – Planning and Strategy
  • Calvin – Approaches to Compensation
  • Yao – Pay Gaps and Compensation
  • Jason – Employee Morale and Motivation
the reasons for choosing china
The Reasons For Choosing China
  • One of the fastest growing developing economies in the world
      • 2004, 9.5%
      • 2006-2010, 8%
  • One of the most lucrative markets for their foreign investments
      • Market of 1.3 billion people
china s economic background
China’s Economic Background
  • Prior to 1977, the government owned

everything

  • In 1978, Economic Reforms and Open

Door Policy

  • In 2001, World Trade Organization
  • Today, 20 times larger
labor market and expatriates
Labor Market and Expatriates
  • Cheap
  • Skilled
  • Need parent country nationals
      • As managers
      • As trainers
compensation plan
Compensation Plan
  • The going rate approach
  • The balance sheet approach
  • Calvin compensation plan
expansion of citigroup
Expansion of Citigroup
  • There's an explosion of opportunity
  • Half earnings should derive from international markets by 2009
strategies to enter china
Strategies to Enter China
  • Alliances & partnerships
    • Joint-name credit card with Shanghai Pudong Development Bank (SPDB)
  • License
    • Internet banking license by Central Bank of China
  • Mergers & acquisitions
    • Acquiring stakes in China's domestic banks
compensation approaches
Compensation Approaches
  • Going rate – equal pay, but hard transition from high pay country to lower pay country.
  • Higher of host or home – equality, but very expensive for company.
  • Balance sheet approach – preserves living standards, but can have great disparities.
  • Reference points
balance sheet factors
Balance Sheet Factors
  • Hardship premium
  • Base pay
  • Cost of Living
  • Overseas premium
  • Housing
hardship factors
Hardship Factors
  • Housing
  • Climate and physical conditions
  • Pollution
  • Disease and sanitation
  • Medical facilities
  • Infrastructure
  • Physical remoteness
  • Political violence and repression
  • Political and social environment
  • Crime
  • Communications
  • Cultural and recreation facilities
  • Availability of goods and services
average rental costs
Average Rental Costs
  • Beijing, $1.82/square foot
  • Shanghai, $3.02/square foot
  • Guangzhou, $2.25/square foot
  • Shenzhen, $1.14/square foot
cost of living
Cost of Living

Most expensive cities in the world:

  • Beijing (11)
  • Shanghai (16)
  • Shenzhen (30)
  • Guangzhou (32)

2004 CPI peaked at 5.2%, ended year at 2.4%

Income tax rate 45%

pay gap compensation
Pay Gap & Compensation
  • Comparison of US & China pay gap
  • Pay Compensation
  • Current job market in Banking/Financial Sector in China.
us pay gap
US Pay Gap
  • CEO-Worker pay gap ratio: 281:1 (2002)

(BusinessWeek)

  • Increasing executive pay
    • 2004 Avg. total CEO pay w/ compensation $10.7mil (+5%) (Pearl Meyer & Partners)
  • Pay varies regionally (HR Benefits Manager)
    • Northeast $94,700, West Coast $99,400, North Central $83,400, Southeast $82,900, South Central $87,700 (HR Magazine, Nov. 2004)
china pay gap
China Pay Gap
  • Executive-Employee pay gap ratio: 3-15:1 (2004) (The Development Research Center of the State Council)
  • Salary Range (Domestic vs. Foreign)

Avg. worker salary 7,443 Rmb vs. 15,037 Rmb

Avg. CEO salary 212,000 Rmb

(The Beijing Labor and Social Security Bureau)

china pay gap1
China Pay Gap
  • Pay varies regionally
    • Shanghai 44,957 Rmb, Beijing 42,118 Rmb, Guangzhou 37,096 Rmb (South China Morning Post 2005)
  • Gender Pay Discrepancy
    • Avg. annual income of working women in cities 7,409.7 Rmb (30% less than men)
    • Avg. annual income paid to female executives and professionals (57.9% & 59.6% less than male counterparts)

(The All-China Women’s Federation and the National Bureau of Statistics)

current china job market
Current China Job Market
  • Hot Banking/Financial Market
    • High turnover rates 10-20%
    • Executive incentives: stock options (38%), home leave & company car (52%) (CFO Asia)
what is motivation
What Is Motivation?
  • Basic psychological process which explains why employees behave the way they do in the workplace.
  • Willingness to exert high levels of effort toward organization goals, conditioned by the effort’s ability to satisfy some individual needs
unmotivated unhappy chinese employees
Unmotivated, Unhappy Chinese Employees
  • Highest among State-owned companies
  • Smaller amount for Joint Venture, Foreign Invested Enterprises
  • Higher rate of leaving for high/educated level employees
what motivates employees
What Motivates Employees?
  • Cash Incentive
    • If stay in the company for entire contract length of time
    • Reimbursing employees tuition
  • Treating Employees
    • Guanxi
    • Feelings of belonging
    • Saving faces
    • Loyalty
  • Special Training and Programs
    • Ex: Citigroup’s Financial Education Training/Programs
      • Financial service Training
      • Banking Programs
other motivational factors
Other Motivational Factors
  • Career Development
    • Promotion
      • Performance evaluation
        • Include capabilities, skills, achievements and actions
        • Employees with higher rating should promote to higher post
        • Denied promotion to lower rating employees
        • Avoided seniority-based promotion
  • Shelter
  • Saving plans
  • Gift certificates
  • Rewards
    • Travel
morale factors affecting worker
Morale Factors Affecting Worker
  • Wages
  • Stock options
    • Degree of understanding about the stock option
    • Useful in preserving employees who have worked with a company for a few years and have seen the value of their stocks appreciate
    • Create sense of ownership
      • Work more harder to obtain higher future growth
morale factors cont
Morale Factors (Cont.)
  • Recognition systems
    • Ex: Achievement in R&D prize, Improvement proposal prize, Excellent in customer care prize
    • Public Recognition
      • Allow them to compare against their colleagues
      • For better-educated workers, this recognition can satisfy more than financial benefits