Management Leadership in International Business

The business context discussed in class includes international business functions that included leadership and management. In the current global business environment where businesses are significantly expanding to different countries and markets, business leadership and management becomes demanding and complex especially in the international level. According to Gitsham (2012), this is especially on account of different cultures, policies as well as legal requirements for business operations for which international business leaders have to be conversant with to be successful. As a result international leaders who are competent and effective are on a high demand and limited supply impacting one of the factors that contribute towards the increasing remunerations and bonuses for company leaders compared to the other normal workers.

The remuneration rates in other countries such as the United States which are significantly high compared to the rest of the world, additionally adds pressure to countries such as UK to increase remunerations and bonuses for executive leaders. Given the demand of the best international talent on a global scale Hewlett (2016), and with the possibility of that huge a financial muscle from the companies in the US, UK is faced with significant competitition consequently being forced to subsequently increase their remuneration rates for executive managers. These high rates are justified by the significant role that executive leaders play within the growth and development of a company.

According to Raisiene, Pulokieneand Valickas (2018) inclusivity and all round management of a company including all stakeholder and activities represents the holistic job description of a company CEO and as such the effectiveness with which they are able to mobilize and utilize the available resources significantly indicates an executive leader’s potential for success. This is consistent based on the argument as presented in the case study that international business leaders are effectively innovative, inspirational and bears all the responsibility for the shareholders, customers, employees as well as the business itself. These are significantly enormous responsibility in comparison to all other employees within the company and include a much higher rate of risk for which effectively high compensation should be afforded.

However despite the factors highlighted including increased scope of work, risk and responsibilities for executive managers as compared to all other employees, another major factor that has significantly impacted the increment on executive pay and bonuses within the US, UK and all across the globe are the relevant remuneration policies developed by the company. According Arize, Maruffi, Awad and Malindretos (2015) while shareholders and the board can alter company plans and decisions, they do not possess the capability to decide executive pay as this is effectively reliant on the company’s performance and the salary increment policies available within the company. These policies are increasingly adopted by different countries all across the global including the UK and have significantly led to extensive increment of the executive pay opening a wide wage gap between managers executive leaders and the other employees.

However both the lecture and the case study effectively indulge in contrasting leadership and management of companies and how these two functions differ as well as how they can influence each other. According to Arruda (2016) significant differences can be highlighted between leaders and mangers however the key difference is that leaders are concerned with the eventual achievement of a particular vision while managers are more interested in the effectiveness and efficiency with which the vision is eventually achieved. Companies have leaders in executive CEO/Manager positions while at the same time significantly rely on shareholders within the board to effectively lead the company. Sherman (2018) clarifies that a chief executive Officers (CEO) is the senior most member of the board representing different shareholder and who is charged with making the final decisions with regards to company management and other activities.

Both the board and the CEO are as such significantly invested and involved in effective high decision making for the company. According to Sherman (2018) the exact differences between the powers of the board and those of the CEO can only be differentiated by the company’s policies on different matters. While in some companies the CEO is part of the board and even sits on the meetings as a chair making decisions along with the board regarding different aspects of the organization, in other cases the board is separate from the CEO and is charged with matters pertaining to the company’s future strategies including firing and hiring CEOs as well as the relevant and effective remuneration. Organizations such as Banks especially are notorious for this type of leadership.

This is clearly demonstrated by the case study. The crisis in banking sector in the UK that saw CEO remuneration and bonuses increasing on an annual basis as a result of requirements by the effective policies regardless of whether the institution was performing and making profits elicited the concern of other shareholders and significantly led to the changes in policy. As a result of the policies requiring an increase of up to 70% of CEO remunerations and bonuses within given periods coupled with significant retirement benefits, Fred Godwin continually received increased remuneration regardless of the financial lack of performance of the Royal Bank of Scotland. This incident in 2009 led to the changes in policies on different banking institutions so as to limit the CEO power and remuneration benefits.

New policies such as tying bonuses to performance of CEOs emerged and further impacted CEO performance leading to subsequent growth of the banks. The Royal Dutch Shell for instance passed a new policy that bonuses and remuneration increments will only be afforded to executive mangers if the company makes it to the top 5 oil companies. This significantly led to the improvement of the company’s management and performance. While the remuneration of CEOs and mangers continue to increase overtime, the literature with regards to remuneration significantly broadens as well.

The Agency theory according to Kopp (2019,) premises that remuneration are designed to appeal to managers self interests so as to impact their talent and dedication to organizations which eventually impacts. Through intensive performance of managers and increased performance of the organization the increased remuneration package for managers significantly impact shareholders by increasing shareholder value. Agency theory as such supports the policy of basing pay decisions on policies of organization development and growth. This theory is typically used in the US and UK where managers and CEOs pays significantly rise at a greater rate compared to the normal employees pay.

The highly incremental remuneration rates and pay for executive managers are based on the fact that managers bare all the risk with relation to an organization; its operations and performance. According to Hewlett (2016) the CEO is responsible not only for effective performance of an organization but also for the effective management of all aspects of the organization including employees, customers, shareholders and all available stakeholders. As such through effectively performing his/her duties different areas of the organization will all effectively develop leading to increased value for all stakeholders involved.

The role of leadership and management of an organization eventually as highlighted in the lecture is to ensure effective growth and development of companies. In most companies according to Raisiene et al. (2018) the CEOs take charge of both leadership and leading the organization towards a clarified vision as well as management of the different resources to ensure ultimate success. In so doing he/she bares a significant burden of risks on behalf of all stake holders within the organization as such upon his/her success the remuneration, benefits and bonuses are expected to be significantly high as highlighted by the case study. In addition given the increasing international competition for the best talent in international management and leadership for multinational companies, different countries and markets are forced to significantly increase the amount of CEO remuneration and bonuses in order to stay competitive. According to the case study UK is forced to maintain a significantly high rate of CEO remuneration so as to stay competitive with the US market.

While CEOs deserve a significantly high remuneration as highlighted by both the case study and the literature, the increasing rate of CEO remuneration should be significantly standardized with that of the average worker within the same company in order to significantly minimize the wage gap. CEOs extensive contribute towards organizations success, however, without the normal workers to assist in the realization of the CEOs visions then effective implementation of business strategies and objectives would not be possible thereby inhibiting growth and performance. This indicates that other employees are as significant to the company as the executive managers and as such should also benefit from the progressive development of the company with a consistent increase of in their remuneration. This, along with any relevant and deserved bonuses and benefits.

References

Arize, A., Maruffi, B., Awad, M. and Malindretos, J., 2015. How Does CEO Compensation in U.S Corporations Compare with European and British Firms? A Review of the Literature. Accounting and Finance Research, 4(3).

Raisiene, A., Pulokiene, A. and Valickas, A., 2018. Examining Leadership Characteristics at International Multilaterals. Montenegrin Journal of Economics, 14(3), pp.189-198.