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Dear Reader
By Stephan Kuhn Editorial
The growing emergence
of a “new global
executive”
Recruiting and retaining talent is a perennial challenge for any multinational business. In rapidgrowth
markets, there is already intense competition for relatively small numbers of highly skilled
and experienced workers, especially within middle and upper management, despite huge
numbers of new graduates emerging each year. In developed markets, multinational businesses
are grappling with other challenges: an aging workforce as a result of demographic change,
and all too often a disconnect between the skills of the labour force and those that businesses
need to succeed.
Addressing these talent mismatches requires companies to think carefully about how they
manage their human capital on a global basis. For many, the greater use of overseas postings is
an important tool for filling talent gaps and transferring best practice around the world.
Gaining experience in other markets is also a crucial part of management development, helping
high-potential employees to develop the international experience and cultural understanding
that will enable them to lead tomorrow’s global business. Can tomorrow’s CEO be someone without
deep, first-hand knowledge of today’s rapid-growth markets?
In recent years, the pattern of international postings has evolved. Traditional expatriate models,
whereby companies relied on the experience of managers from developed markets to establish
operations in rapid-growth economies are now just one part of the mix. Today, there is
a much more fluid, dynamic approach to the migration of talent, with executives also moving
from rapid-growth to developed markets, and also from one rapid-growth market to another.
The emergence of a new generation of “global executives”, while beneficial for the business overall,
presents companies with many challenges from a tax perspective. Different rates of income
tax around the world can make it difficult for companies to create remuneration structures that
equalize liabilities between jurisdictions. A related challenge here lies in crafting incentive
structures that motivate global executives, without creating a mismatch between them and local
workers. Beyond this, social security obligations and pension entitlements, complex enough in
many jurisdictions, become even more challenging to manage for mobile employees. In addition,
meeting the challenges of housing, schooling for children and potentially work assistance for
spouses present complications. Obtaining appropriate residential and working permits are also
critical steps in managing risks for both the firm and employees. Even employees who are not
based overseas can present problems because they may trigger local tax liabilities if they travel
frequently enough.
In this issue of T Magazine, we look at the emergence of a new generation of “global executives”,
either traveling frequently, or else shifting from one international posting to the next. We
consider how companies are developing global talent management processes to build talent
pipelines for the future, and explore the tax implications of this increasingly mobile workforce.
We hope that you find the publication valuable and stimulating.
Stephan Kuhn
Stephan Kuhn is Area Tax Leader for the Europe, Middle East, India and
Africa (EMEIA) region at Ernst & Young.
Ernst & Young Issue 07 T Magazine 3