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 parentcompany 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 adjust
Manager’s inability to adjust
Other family problems
Manager’s personal or emotional immaturity
Inability to cope with larger overseas responsibilities
European
multinationals
Inability of spouse to adjust
Japanese Firms
Inability to cope with larger overseas responsibilities
Difficulties with the new environment
Personal or emotional problems
Lack of technical competence
Inability 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-Orientation
Possessing 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 do
Being nonjudgmental and flexible in management style
Cultural Toughness
Relationship between country of assignment and the
expatriate’s adjustment to it
Training and Management
Development
Training of expatriates
• Lesson
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
Accounting in the
International Business
國際企業會計
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
 The relationship between business and the
providers of capital.
 Political and economic ties with other
countries.
 The level of inflation.
 The level of a country’s economic
development.
 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
Cash
Receivables
Parent
Foreign Subsidiary
$1,000
$250
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
Cash
$1,000
$250
Receivables
3,000*
900
300
500*
$300
500
5,000
1,000
11,000
Payables
Revenues
7,000**
Expenses
2,000
•
•
3,000**
Debit
Credit
Consolidated
$1,250
$300
1,000
*Subsidiary owes parent $300
**Subsidiary pays parent $1,000 in royalties for products licensed from parent.
3,600
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
Cash
Owners’ equity
10000000
10000000
Exchange Rate
U.S. Dollars
1:100(美元比日幣)
100000
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
Owners’ equity 10000000
108188
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
Self-sustaining、autonomous
Foreign
subsidiary
No.3
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 Systems
The Lessard-Lorange Model
• To deal with exchange rate problems，Lessard and
Lorange point out three exchange rates：
The Initial Rate
the spot exchange rate
when the budget is
adopted
The Projected Rate
The spot exchange rate
Forecast for the end
of the budget period
The Ending Rate
the spot exchange rate
When the budget and
performance are
being compared
Rate Used Translate Actual Performance for Comparison with Budget
Initial (I)
(I) Budget at initial
Actual at initial
Projected (P)
Budget at initial
Actual at projected
Rate Used for
Translating
Budget at projected Budget at projected
Budget
Actual at projected
(P) Actual at initial
Budget at ending
Actual at initial
(E)
Budget at ending
Actual at projected
Ending (E)
Budget at initial
Actual at ending
Budget at projected
Actual at ending
Budget at ending
Actual at ending
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
＄230
230
Cost of component per unit
100
120
Other costs per unit
100
100
Profit per unit
＄30
10
Revenues per unit
Separation of subsidiary & Manager
Performance
Subsidiary’s performance
Manager’s performance
return of investment
other indicators of profitability
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!!