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Feature The global executive people on assignment is hugely important, agrees Ferrigno. “You see people go with the wrong expectation to markets, thinking they are there to show and tell when they should be there to listen and learn,” he says. Indeed, appropriate metrics are a central part of defining the assignment properly. Global executives should not be evaluated against traditional business measures such as revenue goals, but they should also be measured on how well they are adapting to their assignment. “From there you can quantify the return,” says Schupp. A clearly defined assignment also helps significantly in finding the right person for the job. The ideal attributes of potential international executives is one of the most studied aspects of global transfers. But barring some obviously useful aspects – cultural sensitivity, ability to interact with others, and a desire to succeed – no definitive list exists. Inevitably, choosing a candidate is a balancing act between the talent available, the ability of candidates to thrive in a foreign environment, and the skills needed to do the particular job at hand. “There is no perfect test. Each case has to be looked at individually,” says Steele. Practical issues Once the job is defined, and the correct person found, international assignments throw up a wide range of challenges for the sending company. Many of these have long been present - from the basic need for appropriate visa and working permits, to the more complex need to align assignment strategies with overall business goals - but several are worth noting here given how they are changing. All of these issues are discussed in greater detail in other articles throughout this issue of T Magazine. Nevertheless, as the list highlights, there are many practical complexities of using global executives. The social network Any transferring executive has a network of social connections at home that will be disturbed as a result. This is especially true of close family. “It is also increasingly difficult to move some employees on assignment when their spouses work,” says Waty. “We do provide spousal support to find work in the new location and support to complete further education. Very often we can ‘sell’ the assignment on the basis that it is a great experience for the whole family in terms of personal development.” A separate issue is that an increasing number of people may be together but not married, raising challenges over immigration rights. Addressing family issues is more than just a practical matter: it may define how well international executives fulfil their assignments. “Very often, if an executive has been successful, it is thanks to a spouse and family who have a global mindset,” says Waty. “Companies are not doing enough to assess how well the family can adapt.” Compensation arrangements As the goals of international placements evolve, payment arrangements need to keep pace. “If you send people around as part of their development, you are going to need to look at how these costs get people to take on the right challenges without overly enriching them,” notes Ferrigno. It might be valuable, therefore, to tie compensation to metrics designed around those challenges. Another current trend is for companies to use “localization” packages, with executives receiving a lump sum up front to cover moving costs, but then being compensated in the same way as their new local peers, including in terms of eligibility for bonuses. Not only does this control costs, but it leads to executives being taken more seriously by their colleagues because they now have an obvious stake in local success. Dealing with tax International employment has always brought income tax complications, but the current economic climate can make this even tougher. “Many countries are looking for additional sources of revenue, so revenue agencies are turning over rocks to make sure organizations are compliant on income or payroll tax,” notes Schupp. Over half of companies polled by Ernst & Young describe tax compliance as very challenging. Although the most pressing specific issues vary by jurisdiction, some tax issues have a growing profile internationally. For example, the payment of stock options to executives. Depending on where the executive is resident for tax purposes when these are earned and exercised, a variety of countries – which may or may not have relevant double taxation treaties – might wish to tax the proceeds. There is also the important need to adhere to social security obligations in all relevant jurisdictions. Bringing them back again “Assigning a person abroad creates a retention issue. It is not always easy to bring back a former assignee,” says Waty. Indeed, Ernst & Young research indicates that just over 1 in 10 executives resign within two years of returning from foreign assignments. Given the significant investment made into the development of these executives, this can be a costly loss for any company. The broader picture is that the expat has, in recent years, evolved into the global executive. Within this, the key factors of who is being sent, why they are going, and where they are headed to, are all changing as companies have transformed themselves from centrally run multinationals to globally diverse enterprises. In order to manage this new species, however, businesses have to keep up. In particular, different functions in the company need to work together in a way that too few are currently doing. Percent of the total number of employees are long-term assignees (>12 months) 12 T Magazine Issue 07 Ernst & Young 2008 21% 2011 2% 9% 18% 7% 6% 9% 73% 64% Source: Ernst & Young’s Global Mobility Effectiveness Survey 2011
Credit: Keystone / EPA / Julien Warnand Martin Schulz, President of the European Parliament Interview Toward integration Martin Schulz is Member of the European Parliament for the Social Democratic Party of Germany, since 2004 leader of the Socialists in the European Parliament. In January 2012, the 56-year old politician was elected President of the Parliament. One complication facing multinational organizations trying to relocate and develop more rounded global executives is the national barriers that inhibit the free movement of labor. Even within an integrated region such as the EU, this can prove difficult, not least due to differing social security schemes and tax regimes. T Magazine speaks to Martin Schulz, the new President of the European Parliament, about what is being done to create a more flexible labor market. What is being done from a political perspective, at both a national and European level, to eliminate the barriers to cross-border tax and social insurance legislation and facilitate more flexibility on the international labor market? Martin Schulz: I must point out, unfortunately, that there are practically no borders for capital any longer, whereas in terms of labor mobility, the freedom of movement for workers, there are still considerable obstacles. However, many fiscal issues and, above all, decisions relating to the labor and social sector are still the national responsibility. I regret this since, in Europe, it means we are faced with fiscal and social competition between one another, usually with a downward tendency, which is damaging to the economy in many of our countries. This 754 The European Parliament is the only directly-elected EU body and one of the largest democratic assemblies in the world. Its 754 Members are there to represent the EU’s 500 million citizens. complicates the desired convergence of our economies and ultimately does not lead to sustainable growth for the Member States. I see our social model as a key to the economic success of the European Union and it will play an essential role in overcoming the current crisis. All the same, the European Parliament will continue to press for decisions in important fiscal matters – whether toward the harmonization of corporate tax assessment bases or toward a financial transaction tax. What are Germany and/or the EU doing to standardize the various pension regulations? Our disadvantage as an economic zone – compared, say, with the USA – is the coexistence of 27 different national systems. Of course, variety and difference can also be a bonus: I am against total standardization. But what we do need is a common framework and common rules, so that workers can move inside the EU without barriers. Yes, superannuation and pension schemes are a matter for Member States. But the European Parliament will support any steps aimed at helping enable workers to retain their retirement pension claims if they move from one Member State to another. However, in that process, there should be no need to weaken national social standards. One of the key areas of harmonization lies within the financial services sector. What else needs to be done here? As noted, capital nowadays can be transferred between countries almost instantaneously. But many financial centers are only inadequately regulated, a situation that can cause substantial damage to our economy. I firmly believe that politicians have to help to set clear guidelines here, which is why I wholeheartedly support measures taken within the G20 framework – it is in this area that we must take joint action. The European Parliament has already made an important contribution by limiting certain kinds of short selling in particular and by generally creating more transparency on the derivatives trading market. Ernst & Young Issue 07 T Magazine 13
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