Globalisation and the emergence of the BRIC economies


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Globalisation and the emergence of the BRIC economies have opened up significant new opportunities for International Law firms over the last couple of decades. The turn of the Millennium saw the majority of the 'Magic Circle' UK Law firms expand their presence into the Asia Pacific (APAC) region looking to capitalise upon China entering the World Trade Organisation (WTO). Upon China entering the WTO in 2001; many International businesses decided to create wholly owned foreign enterprises (WOFE) within China. A side effect of which is that UK Law firms have been sending senior level staff on long term overseas assignments to setup foreign subsidiaries. This research paper aims to explore and extrapolate the different elements of an effective compensation package that the UK legal sector offers to their senior fee-earning staff embarking on an overseas assignment within the BRIC nations.


In today's economic climate, Multinational (MNC) organisations are under a lot of pressure to cut costs and find new innovative ways of conducting new business overseas. In the 1986 book titled Competition in Global Industries, Porter considered that, "Competing internationally is a necessity rather than a matter of discretion for many firms." The traditional way for MNC's to expand their overseas presence is to send senior employees to setup and manage new business opportunities on foreign shores.

Multinational Law firms need to think carefully about whom they send overseas and the key business drivers for doing so. It is therefore important that employee's being sent on foreign postings are adequately compensated and properly motivated to ensure that the opportunity is a success for both business and individual. Sending senior employees on a foreign posting generally costs three to four time as much as employing local staff. (Economist Dec 14th 2000). Selecting and retaining the right kind of expatriate from the outset is key, as the cost of early departure for US workers posted overseas, can cost the business north of $1M (Insch G.S 2002)

In order to successfully motivate, retain and attract qualified expatriates, businesses must strike the right balance when devising compensations strategies in order to remain competitive in their foreign operations (Robert H. Sims and Mike Schraeder 2005). Key elements of an effective compensation strategy will include the achievement of organisational goals aligned with the overall strategic plan, (Larry .Phillips and Fox 2003) as well as an attractive remuneration package which retains and motivates the expatriate throughout contractual obligations. The home country balance sheet approach (Solomon 1995) is the most common system for compensating expatriates. The balance sheet method is designed to equalize the cost of living between the host and home country taking into account housing, children's education, healthcare, goods & services and taxable income. Mervosh (1997, p. 14) alludes that the balance sheet approach is appropriate if the business is initially moving into the new jurisdiction. As the business matures in the international market, the company's business is no longer an extension of the home office; it becomes an entity in its own right. This is now the case for many of the top UK Law firms who have been operating in the BRIC economies for a decade or more. Given the current crisis in the economy; the future strategy for expatriate compensation packages based on the balance sheet approach may need to be reviewed within legal MNC's to assess whether or not it is generating the expected ROI for the business and successfully motivating and rewarding the individual to meet his/her contractual obligations .

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