Management Compensation Systems in MNCs and Domestic Firms: Cross-National Empirical Evidence

Abstract

This is a study of the relationship between institutional settings and managerial compensation systems, based on extensive cross-national survey evidence. We compare differences in practices between Multinational Corporations (MNCs) and domestic firms across a range of capitalist archetypes. We find that MNCs are more likely to promote compensation systems that incentivise managers in line with organisational performance compared to domestic firms. Our findings also reveal persistent diversity reflecting firm type and institutional setting. We find that the gap between MNCs and domestic firms in terms of the usage of incentive-related compensation is less pronounced in Liberal Market Economies than in other settings. This suggests that it is a combination of being an MNC and the specific home locale that moulds approaches to managerial compensation. This reflects considerable hybridisation of practices within and between settings.