Cross-Cultural Equity Issues: US Citigroup Expatriates in ChinaPresentation OverviewThe Reasons For Choosing ChinaChina’s Economic BackgroundLabor Market and ExpatriatesCompensation PlanExpansion of CitigroupStrategies to Enter ChinaCompensation ApproachesBalance Sheet FactorsHardship FactorsAverage Rental CostsCost of LivingPay Gap & CompensationUS Pay GapChina Pay GapSlide 17CEO Pay ComponentsCurrent China Job MarketWhat Is Motivation?Unmotivated, Unhappy Chinese EmployeesWhat Motivates Employees?Other Motivational FactorsMorale Factors Affecting WorkerMorale Factors (Cont.)Conclusion- Putting it TogetherSlide 27Cross-Cultural Equity Issues:US Citigroup Expatriates in ChinaBy Team #3:Jason LimCalvin MakYao Ting NiHsien-Fang (Fiona) WuTaojune (Simon) ChengPresentation OverviewFiona – Planning and StrategyCalvin – Approaches to CompensationYao – Pay Gaps and CompensationJason – Employee Morale and MotivationThe 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 peopleChina’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 largerLabor Market and ExpatriatesCheapSkilled Need parent country nationals As managersAs trainersCompensation PlanThe going rate approachThe balance sheet approachCalvin compensation planExpansion of CitigroupThere's an explosion of opportunityHalf earnings should derive from international markets by 2009Strategies 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 banksCompensation 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 pointsBalance Sheet FactorsHardship premiumBase payCost of LivingOverseas premiumHousingHardship 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 servicesAverage Rental CostsBeijing, $1.82/square footShanghai, $3.02/square footGuangzhou, $2.25/square footShenzhen, $1.14/square footCost of LivingMost 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Comparison of US & China pay gapPay Compensation Current job market in Banking/Financial Sector in China.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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 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)CEO Pay ComponentsCurrent 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?•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 needsUnmotivated, Unhappy Chinese EmployeesHighest among State-owned companiesSmaller amount for Joint Venture, Foreign Invested EnterprisesHigher rate of leaving for high/educated level employeesWhat 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 ProgramsOther 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TravelMorale 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 growthMorale 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 benefitsConclusion- Putting it TogetherThank You For Your Attention!Any