Multinats Not Properly Reacting to Weak Dollar Impact on Comp

September 18, 2008 ( - A new Mercer study found that most multinational organizations have not implemented solutions for mitigating the impact of currency fluctuations on current compensation programs for overseas employees.

A news release about itsImpact of WeakeningU.S.Dollar on Compensation in Multinational Companies SnapShot Survey”said that the response came despite the fact that nearly half of responding companies (47%)admittedthe depreciating value of theU.S.dollar has had a moderate to significant impact on their compensation programs.

“Foreign exchange fluctuations can have a substantial impact on compensation programs and policies,” said Rebecca Powers,principal at Mercer, in the announcement. “As the war for talent becomes worldwide, specifically for high-performing executives, organizations need a competitive compensation strategy that appropriately responds to shifts in currency for key employees around the globe.”

According tothesurvey, equity-based long-term incentive plans, base salary, and global mobility policies are the compensation components most impacted by currency fluctuations, specifically the declining value of theU.S.dollar.

Significantly,the majority of respondents (70%) do notuse levels and dollar parity as a reference when determining pay rates for non-U.S.based jobs.

“Too great a focus on U.S. pay levels and dollar parity may result in executive pay that is no longer competitive in the changing global market,” said Laurent Papaix,principal at Mercer. “Most companies use local market peer groups for determining pay for non-U.S.-based executives.

Of the pay components affected by the depreciating dollar, equity-based, long-term incentive plans are impacted the most.Nearly three-quarters of responding organizations (72%) report long-term incentive plans denominated inU.S.shares.Moreover, 86%of long-term incentive plans do not include an adjustment for fluctuations in the value of theU.S.dollar.

The studyincludes responses from more than 60 multinational organizations, the majority of which have headquarters in North America and more than 20,000 employees.