Business and professional services: competing in a more mobile world
This chapter provides a preliminary analysis of the role of risk sharing and incentive contracts in setting compensation policy for expatriate managers. The present framework was developed in a conceptual way, yet it was substantiated by interviews with several top executives from multinational corporations. The executives emphasized the importance of risk of loss of clients and reputation as a major factor in sending expatriate managers to head their companies' operations in foreign countries. Three propositions were made regarding the physical presence of expatriates in a foreign operation, as well as the relative 'intensity' of these expatriates in the composition of the managerial ranks. It outlines some preliminary model formulating the compensation policy from an agency-theory/risk-sharing perspective. Possible extensions should attempt to include other non-monetary factors for developing a more comprehensive model of the compensation of expatriate professional managers. The model portrays only part of the relation between a parent company and its expatriate manager.