Starting a company is always a dream for many young entrepreneurs across the globe.

  Starting a company is always a dream for many young entrepreneurs across the globe.
Benefits associated with economies of scale are a thing that every CEO wants to have. While the
dream holds for those who stick to it, it eludes others. Starting a company requires that an
individual or group investing to be well prepared to pay high salaries to expert employees who in
most cases possess key skills that are relevant towards propelling the company to success. While
some companies will usually have the resources, others do have enough. An alternative strategy
is usually sort after in order stay relevant. Equity compensation has been used by many small
companies to attract and retain employees.
Equity compensation is defined as a cashless compensation which symbolizes ownership
interest in a company. This type of employee compensation has proven to be costly and
involving. Companies willing to use it must have the proper legal framework, accounting
strategy, effective advice about taxation policy and general planning required for the same.
When doing equity compensation, companies provide their employees with options for
stocks alongside privileges for purchasing company stocks at specially predetermined costs
commonly referred to as exercise prices. However, this equity compensation depends on the time
that a particular employee works for the company. This means, employees who work for the
company for a long period of time get the privilege to enjoy this kind of compensation (Thatcher,
2005, para, 6). It has been discovered that this method is suitable for small and large companies
as it helps their employees stick with them (Equity compensation, 2014, para, 2).
The question that most managers ask themselves is how reliable equity compensation is
to companies in the short and long term. Robins (2014, para, 1-2) notes that equity compensation
is a good motivator. But it is only reliable if it motivates the right behavior for the good reason,
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Sample: Marketing - Principles of Compensation
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otherwise, its hidden requirements for implementation can prove costly for a company in the
long run (McNeil, 2006, para, 2)
Applying equity compensation is a big headache for multinational companies. Without
clear legal and accounting framework most companies make critical errors that affect the
company (Schubert, Barenbaum, 2008, para, 4). Some companies chose the amount of stock to
be given to employees based on percentages that other companies are using. This is wrong
simply because, companies are different with respect to their age in the market, properties they
own, market share and other critical areas. Decisions made about issuing large stock to
employees should be arrived at by simple assessment of “reasonable” percentages (Rosen, n.d,
para, 3-5).
Further, the idea of promising employees huge stock in the future based on growth
prospects of the company may also not be valid. There is no certainty that the employee will stay
in the company for the said future and secondly, market dynamics may render the offer
irrelevant. Therefore, workers who accept equity compensations do so for mere speculations that
the company will grow and market factors will remain constant or improve. So how exactly do
multinational companies ensure that pay differentials between international staff does not lead to
resentment and de-motivation of staff?
 Pay management is of basic significance as far as industrial relations are concerned.
Employment relationships in multinational companies is built around labour payment and is the
noticeable focus of labour’s combined concern. It is a common observation that employees
receive different pays for similar jobs across different companies, why is this so? The reason is
that wages in companies are influenced by labour supply forces and labour demand in a labour
market that is considered as being very competitive (Brown, Marginson and Walsh, 2001, para,
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3-4). This comes with a result that at the equilibrium point, there is no single company that will
want to pay its employees above it, if they do, they will run in losses. Alternatively, if they pay
less than the equilibrium, they run the risk of failing to recruit and retain workers and may be
driven out of the market.
 There are various theories that seem to account for methods in which international
payments can be effected in MNCs; the first one is the resource-based theory. Under this theory,
organizations receive competitive merits by having unique human resources in the industry. This
approach aims at using reward schemes to attract and retain experienced workers in their
companies. The agency theory is also effective in defining how payments can be arrived at in
effecting international payments in MNCs. The agency theory gives emphasis to principal-agent
relatiosnhip. This relations