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Student name:__________
TRUE/FALSE – Write ‘T’ if the statement is true and ‘F’ if the statement is false.
1) Understanding international compensation begins with recognizing differences and
similarities and figuring out how to best manage them.
⊚ true
⊚ false
2) Evidence indicates that MNCs are influenced by both the institutional pressures in their
home country and in the local context.
⊚ true
⊚ false
3) Companies in the United States, United Kingdom, and some central European countries
are most likely to have centralized wage bargaining.
⊚ true
⊚ false
4) In the context of Hofstede’s national culture dimensions, masculine societies emphasize
assertiveness, performance, and competition.
⊚ true
⊚ false
5) In Malaysia and Mexico, egalitarian pay structures fit best with the culture.
⊚ true
⊚ false
6) A study found that Slovenian managers tended, on average, to be more risk taking and
individualistic than U.S. managers.
⊚ true
⊚ false
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7) In France, more than 90 percent of workers are union members and less than 10 percent
of workers are covered by collective agreements.
⊚ true
⊚ false
8) Unionization rates are higher in Europe than in Asia.
⊚ true
⊚ false
9) While state-owned enterprises still play a major role in China, now, township enterprises,
wholly privately owned enterprises, joint ventures with foreign companies, and wholly owned
foreign enterprises play a much larger role in China than in the past.
⊚ true
⊚ false
10) Generally, it is difficult to compare the total compensation of a U.S. firm with that of a
foreign competitor.
⊚ true
⊚ false
11) It is easier and less complex to compare living costs and standards across countries than
comparing total compensation.
⊚ true
⊚ false
12) In Japan, person-based factors (seniority, ability, and performance) carry important
weight in setting base pay.
⊚ true
⊚ false
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13) Both the Japanese system and the German system place much greater emphasis on
external markets than on internal alignment.
⊚ true
⊚ false
14) In Japan, base pay is not based on job evaluation or market pricing, nor is it attached to
specific job titles.
⊚ true
⊚ false
15) Since the Japanese system is so seniority-based, labor costs decrease as the average age
of the workforce increases.
⊚ true
⊚ false
16) According to the Japan Institute of Labour, for most employees, bonuses are variable pay
that help control the employer’s cash flow and labor costs.
⊚ true
⊚ false
17) Japanese pay systems tend to emphasize promotions based on a combination of
supervisory evaluation of trainability, skill/ability levels, and performance rather than on
performance alone.
⊚ true
⊚ false
18) Only 5 percent of U.S. expatriates believe their company values their overseas
experience.
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⊚ true
⊚ false
19) Research suggests that more than 75 percent of U.S. expatriates know what their jobs will
be when they return home.
⊚ true
⊚ false
20) Research suggest that 77 percent of U.S. expatriates have less disposable income when
they return home from overseas assignments.
⊚ true
⊚ false
MULTIPLE CHOICE – Choose the one alternative that best completes the statement or
answers the question.
21) ________ is an example of a country with a highly decentralized approach to pay setting
with higher wage flexibility.
A) Sweden
B) Germany
C) Belgium
D) The United States of America
22) According to Hofstede’s cultural dimensions, in Malaysia and Mexico, where there is
high power distance, ________ pay structures are appropriate.
A) equitable
B) hierarchical
C) egalitarian
D) parallel
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23) KayLeaf, Inc. wants to set up a unit in Hong Kong. To facilitate this, it sends its manager
to Hong Kong to gather information about the culture of Hong Kong. Which of the following is
most likely to be a suggestion from its manager?
A) To use incentives that are based on an employee’s performance
B) To ensure that employees remain integrated into groups, usually around their
families
C) To focus on group-based pay rather than on individual-based pay
D) To ensure that all employees are entitled to equal pay increases
24) Identify Hofstede’s national culture dimension that can be described as the extent to
which a culture programs its members to feel uncomfortable in unknown and unusual situations
and find it difficult to control the uncontrollable.
A) Masculinity versus femininity
B) Power distance
C) Collectivism
D) Uncertainty avoidance
25) In the context of Hofstede’s national culture dimensions, the “individualism–collectivism”
dimension refers to:
A) the degree to which people are supposed to look after themselves or remain
integrated into groups, usually around the family.
B) the extent to which the weak members of organizations and institutions accept and
expect that power is distributed unequally.
C) the extent to which a culture programs its members to accept delayed gratification of
their material, social, and emotional needs.
D) the degree to which a culture programs its members to feel either uncomfortable or
comfortable in unstructured situations.
26) Which of the following countries has the highest number of people in the workforce
belonging to unions?
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A) Japan
B) Sweden
C) Italy
D) South Korea
27) Which of the following statements about ownership and financial markets is true?
A) In the United States, corporate ownership and access to capital is far more
concentrated than in most other countries.
B) Ninety percent of American households own stock in companies either directly or
indirectly through mutual funds and pension funds.
C) Recent tax law changes in many countries have made stock options more attractive,
but limited ownership of many companies remains the rule.
D) Large conglomerates in Germany link performance bonuses to increased shareholder
value as it is the most effective pay system.
28) The degree of discretion managers have to make total compensation a strategic tool is
referred to as
A) managerial accountability.
B) democratic accountability.
C) managerial autonomy.
D) managerial liability.
29) In the comparison of the pay systems of two well-known Japanese companies Toyota and
Toshiba, Toyota
A) places greater emphasis on external market rates.
B) places less emphasis on individual-based merit pay.
C) uses far more levels in its structure.
D) places less emphasis on individual-based performance pay.
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30) Traditionally, Japan’s employment relationships were supported by
A) lifetime security within the company.
B) performance-based pay systems alone.
C) centralized unions representing workers across several companies within an industry.
D) performance-based promotion systems alone.
31) Which of the following is a factor determining base pay in the Japanese traditional
national system?
A) Job evaluation
B) Career category
C) Market pricing
D) Specific job title
32) Bonuses paid in Japan are
A) additional pay equivalent to two weeks of annual salary.
B) typically paid once a year.
C) not an expectable additional payment.
D) not necessarily related to performance.
33) Which of the following statements is true about the German traditional national system?
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A) In Germany, companies place much greater emphasis on external markets than on
internal alignment.
B) Labor markets in Germany remain highly regulated, and tariff agreements set pay for
union workers.
C) In Germany, workers are entitled to a maximum of 15 days of vacation and receive a
maximum of 10 national holidays annually.
D) Performance-based bonuses have been an integral part of a traditional German pay
system for unionized workers.
34) In Japan, internal alignment based on ________ is far more important than other factors.
A) skills
B) jobs
C) accountabilities
D) seniority
35) Unlike German companies, Japaneseorganizations
A) encourage flexible workers.
B) focus on the shorter term.
C) are less egalitarian.
D) are market-sensitive.
36) Which of the following statements about evolution and change in the traditional German
model is true?
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A) Nearly one in ten German adults owns stock.
B) High birth rates are pushing up the costs of the social support system.
C) A relatively flexible labor market means that employers are finding it easier to move
to other EU countries than before.
D) Many of the changes in Germany are the result of global competitive pressures and
technological changes.
37) In the context of the general compensation strategies, identify a true statement about
localizers.
A) The corporate headquarters and the operating units are heavily networked to share
ideas and knowledge.
B) Managers around the world share a common vocabulary and a clear message about
what the leadership values.
C) They are virtually similar to exporters.
D) They operate independently of the corporate headquarters.
38) A Japanese citizen working for Toyota in Georgetown, Kentucky, is a
A) host-country national.
B) third-country national.
C) parent-country national.
D) local country national.
39) An Indian citizen working for a Japanese company in India is a
A) foreign country national.
B) third-country national.
C) parent-country national.
D) local country national.
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40) A Korean citizen working for Toshiba, a Japanese company, in Canada is a
A) host-country national.
B) third-country national.
C) parent-country national.
D) local country national.
41) Which of the following is true of hiring LCNs?
A) Companies incur relocation expenses and other substantial expenses when hiring
LCNs.
B) Companies need to be concerned about LCNs’ being able to adapt to the local
culture.
C) Rarely do organizations decide that hiring LCNs is appropriate.
D) Employment of LCNs satisfies nationalistic demands for hiring locals.
42) KYZ, Inc., a U.S. firm, sends its manager, Ryan, to London to manage its operations
there. Ryan’s salary is still based on the U.S. pay system; however, KYZ offers him a lump-sum
payment to offset the additional standards-of-living expense in London. In this case, which of the
following approaches to expatriate compensation did KYZ use?
A) The cafeteria approach
B) The localization approach
C) The local plus approach
D) The balance sheet approach
43) The base salary plus incentives for expatriates is usually determined by
A) job evaluation.
B) market pay.
C) competitors’ pay levels in the host country.
D) international pay schedules.
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44) When taxes are deducted from employees’ earnings up to the same amount of taxes they
would pay had they remained in their home country, it is known as
A) expat tax.
B) tax equalization.
C) compensatory tax.
D) tax protection.
45) Which of the following approaches seeks to ensure that employees on overseas
assignments have the same spending power as they would in their home country?
A) The assets–liability approach
B) The balance sheet approach
C) The compensatory tax approach
D) The income statement approach
46) Which of the following statements is true of the localization approach to expatriate
compensation?
A) It is more expensive than the balance sheet approach regardless of the location.
B) It ties an expatriate’s salary to the host country’s salary scales.
C) It ties an expatriate’s salary to the home country’s salary scales.
D) It ensures that an expatriate’s pay is equalized without the need for relocation
bonuses.
47) MayFly, Inc., a firm headquartered in Paris, France, sends one of its employees to
Frankfurt, Germany, and Barcelona, Spain, to manage its operations in these cities. The
employee would be required to alternate between the two cities every six months. Mayfly offers
only a moving expense on top of the base pay as the employee would be moving only within
European Union countries. Which of the following approaches to expatriate compensation is
exemplified in this situation?
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A) The modified balance sheet approach
B) The localization approach
C) The local plus approach
D) The lump-sum/cafeteria approach
48) Which of the following ties salary to a region?
A) The cafeteria approach
B) The localization approach
C) The modified balance sheet approach
D) The lump-sum approach
49) ________ sets salaries according to the home-country system and simply offers
employees lump sums of money to offset differences in standards of living.
A) The modified balance sheet approach
B) The localization approach
C) The cafeteria approach
D) The balance sheet approach
50) According to research, which of the following is true about U.S. expatriates?
A) More than 75 percent believe their company values overseas experience.
B) More than 50 percent of U.S. expatriates are promoted.
C) Only 7 percent of returning expatriates leave their company within one year.
D) Only 13 percent of U.S. expatriates are women.
SHORT ANSWER. Write the word or phrase that best completes each statement or
answers the question.
51) Briefly summarize the degree to which the social contract constrains the employment
relationship in organizations with an example.
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52) Explain the dimensions of national cultural attributes proposed by Hofstede.
53) How do the differences in the ownership and financing of companies around the world
impact international pay?
54) Distinguish between parent-country nationals, local country nationals, and third-country
nationals with examples.
55) What is the balance sheet approach? What is its objective?
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Answer Key
Test name: chapter 16
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