Analysis of Employee Treatment in MNCs in Malaysia

Analysis of Employee Treatment in MNCs in Malaysia check to The capital of South Carolina Encyclopedia (2008), a military man(prenominal) fol piteous similarly cal direct as transnational first step (MNE) or trans go through with(predicate)al corporation (TNC) it is a corporation military control enterprise with manufacturing, sales, or service subsidiaries in ace or to a greater extent than extraneous countries. It put up also be referred to as an international corporation. alike that, Mohamed A. Youssef (2004) say that transnational companies be firms that engages in removed(p) plow investing and owns or controls value-adding activities in more than one country. The study of transnational companies is germane(predicate) to the major theme of changing national business governing bodys in two of import ways. Firstly, international companies reflect the strengths and weaknesses of their own country. Second, multinational companies work in at least two different national business systems, in their fellowship and host countries (Maurits van Os, Gerarda Westerhuis, Onno de Wit, 2003).The multinational companies atomic number 18 a potent fomite for the transfer of not only the capital and other mathematical product functions that also managerial and technical knowledge crosswise nations (Limerick, 2004). Based on Bartletts (2003) look for, the multinational corporations account for 40% of the worlds manufacturing output and al just about a crap of the world craftsmanship. active 85% of the worlds automobiles, 70% of computer and 65% of cheese analogous drinks argon heightend and marketed by multinational corporations. During the last two decades, many lowr corporations also become multinational, some of them in developing nations (The Columbia Encyclopedia, 2008). This much results in precise powerful corporations that encounter figures that exceed some nationals gross domestic product and multinational corporations play an important routine in international dealings and globalization (Multimedia Corporation, 2009).In Bartlett (2003) look into shows that in 1973, the United Nations be the multinational corporation as an enterprise which control assets, factor inies, mines, sales offices and the like in two or more countries. The first qualification unavoid fit a multinational corporation to devour substantial direct enthronisation funds in contradictory countries and not just an exportation business. The second requisite for a true multinational corporation would be a caller that engaged in the active management of these offshore assets rather than only holding them in a passive fiscal portfolio.Overview of Multinational Companies in MalaysiaMalaysia ranks as among the worlds top 20 attractive countries for extraneous direct investment, fit in to the World Investment Prospects Survey 2007-2009. Among the Southeast Asian countries, Malaysia was the third favored unusual direct investment location, just after the Vietnam and Thailand (Rajeswari Raman, 2008).Historically, multinational corporations in Malaysian manufacturing were concent roamd in import substitution production in atomic number 18as much(prenominal) as foods and beverages, chemicals and pharmaceutical. Their involvement in export production was especial(a) to some subprograming activities linked to primary product heavenss. In 1970s, thither was a dramatic transformation in the product structure of multinational corporations charactericipation. From about the mid-1980s, production for the domestic market has become secondary to exploitation Malaysia as a base for manufacturing for the global market (Multinational Enterprises, Employment and original yield in Malaysian Manufacturing, 2005).According to Halims (2000) study, foreign direct investment has always been a major factor in developing Malaysias industrial firmament. The promoting of the presence of the multinational corporations in Ma laysia is to provide domestic firms with access to go on technologies through subcontracting, the creation of spin-off firms, OEM and training activities. The Malaysian semipolitical relation encourages direct foreign investment, limitedly in export oriented manufacturing and high-tech industries, besides it has discretionary authority over person investments. Malaysia has a stated constitution of not promoting low value-added and outwear-industries, preferring quality investments. A foreign company or a multinational corporation flowerpot conduct business in Malaysia through setting up a part office, registering a peg office, setting up a joint venture company or granting patent licenses and franchising. General policy limits foreign equity to minority 30 percent sh bes, save 100 percent foreign ownership in manufacturing is permitted in certain instances for export-oriented industries (www.atimes.com). According to angle of multinational companies in Malaysia (2009), thither are 37 major industry sectors covered in the foreign companies in Malaysia which areAcademic food drink petrochemicalsAccountancy regime pharmaceuticals/medicalAgriculture/environmental indivi triple printing/paper airwave/defence insurance satisfying estate/propertyBanking/finance IT/computers/ packet retailChemicals legal servicesChemicals/petrochemicals machinery/equipment telecoms/communicationsConstruction/engineering manufacturing textilesConsultancy media touristry/travel/leisureConsultancy greats motor industry transportElectronics/ galvanizing cover gasEnergy/utilities packagingMultinational corporations from more than 60 countries shake invested in over 3,000 companies in Malaysias manufacturing sector, newly 1052 regional establishments were approved, which included 67 achievemental headquarters, 182 international procurement centres, 29 regional distri yetion centres, 579 representative offices and 195 regional offices. The of import sources of foreign investment were from USA, Germany and Japan (Rajeswari Raman, 2008).Manufacturing goods, mainly products from the electronics and electrical (E E) industries make up the Malaysias largest body of exports. However, most manufactured exports were produced by foreign firms in Malaysia. For example, the electronics industry which nominates more than half the exports of manufactured goods comprised mostly foreign owned multinationals (Abd Halim, 2000).Based on Rajeswari Raman (2008) research, the major factor that has attracted investors to invest in Malaysia is the governments commitment to maintain a business environment that provides companies with the opportunities for development and profits. The government having the regular government- mysterious sector dialogues and these allow the various business communities to air their views and to re term of enlistment toward the formulation of government policies which concern them. overly, the Malaysian government offers multinational corporations a range of incentives intentional to encourage the establishment of subsidiaries that are regarded as particularly advantageous. The incentives primarily entail taxation allowances and more liberal ownership rights for investments (1) in particular industries like the manufacturing and high technology, (2) in particular geographic locations such as the Multinational Super Corridor or the Eastern Corridor, (3) offer probatory learning opportunities such as from research and development and have particular strategic roles like the operational headquarters and international procurement centres (Southeast Asia, A New Era in Asian Shipping,2005).By the mid-1980s, at that place was a festering conviction among the Malaysian policy circles that certain elements of the ethnicity-establish affirmative action policy of the NEP were inconsistent with the national frugal goal of achieving greater integrating of the Malaysian economy with the global economy. These policy inco nsistencies were redressed and further incentives for foreign investors were come befored beneath the promotion of Investment Act passed in 1986 (Multinational Enterprises, Employment and Real Wages in Malaysian Manufacturing, 2005).The change magnitude trends of outsourcing of core as salubrious as non-core activities by large multinational corporations have open greater investment opportunities in the provision of support services. Malaysia continues to enjoy healthy surplus in the external trade, low unemployment as well as strong international reserves and high national savings (Rajeswari Raman, 2008). According to Rajeswari Raman (2008), the private sector in Malaysia has become partners with the public sector in achieving the nations development objectives. confessionBased on Jaime Bonache (2005) finding, job satisfaction is usually defined as an affective or emotional response toward ones job. A give out net profit, for an equivalent level effort, give determine the d ecision to quit and a higher(prenominal) level of satisfaction. To expect more and active contri entirelyions from the staff members to the company, satisfaction provide become the natural choice. Furthermore, regarding the reason for demission, the Ameri derriere company attributes it to the culture and the Japanese company thinks that the most important reasons for demission are disappointment on well-being and the work satisfaction. Both American company and the Japanese company eff that the requirement of employees should be fully concerned. The welfare, working environment, job satisfaction, and the self-realization are the three factors that instigate the staff. Sonal Shukla (2009) found out that appreciation and recognition are more important and meaningful than a pecuniary pay press or a position promotion. It is important for providing the satisfactory welfare piece of ground in the company, learn and try to meet the employees requirement, create chance for self-im provement and wide space for self-development to the employee in the company because the welfare, individual career development, and the company brand are the three attractive aspects. (Yuanqiang Zhou, Lei Lu, Bo Jiang, 2005).Besides that, gibe to Jaime Bonache (2005), a person can be sexual intercoursely satisfied with the peremptory monetary rewards he or she received and dissatisfied with how they fare relative to others, or with other aspects of his or her job. Job satisfaction depart not be understood as a unitary concept, but as an affective or emotional response toward various facets of ones job, and in which addresses of accessible comparison take place.Furthermore, Jaime Bonache (2005) lodge that satisfaction results from ones perception that work outcomes, relative to the inputs, compares favourably with a significant others outcomes and inputs. We can identify the referent use in the individuals comparisons by analyzing peoples satisfaction with their lucre.Throug h Sonal Shukla (2009) research, it is accepted that a satisfied, stiff and happy employee during times of a recession, gives back much more to the system of rules in terms of loyalty and performance.A low level of salary satisfaction is a precise common problem among all characters of employees. It is well known that employees on international assignments are particularly costly for most organizations (Jaime Bonache, 2005). According to washstand Stredwick (2000), the pay mustiness become more variable quantity instead of a wage or salary being a fixed amount all(prenominal) week, month or year. A growing proportion should become contingent upon performance. Performance can be calculated on an individual basis, often called performance worry pay, or through the team based pay, gain sharing or the profit colligate pay. In addition, there must have the final change for the sanctioned pay itself, which also look at to become more flexible. The 1st involvement that needs to be changed is in how levels of grassroots pay have been determined. In the public sector and in many large private concerns, basic pay levels used to be subject to national negotiations between a collection of unions and officials from the trade association or government body.Furthermore, correspond to John Stredwick (2000), the reward issues need to play a major part to produce a high-performance people machine, focused on organisational objectives. many schemes of performance tie in pay have a built in run afoul because they have been devised to reward the achievements of individuals while other parts of the humane resource policy puts great emphasis on building up team working skills and practice.To release the company from the conflict, there must be a reward strategy in place. It must be derived from and contribute to corporate strategy and be based on corporate set and beliefs. A further development in reward strategy is link up to the development of competencies. O rganizations have identified specific competencies which can differentiate them from their competitors. So, rewards must contingent upon deal and performance (John Stredwick, 2000).Problem statementsNowadays, the economic take turn has given a lot of impacts to each companies and organizations, especially the multinational corporations because they have a lot of transnational companies in each country. No one can run away from this economic down turn and each countrys exports and imports have decreased dramatically in 2009. Malaysia also suffered in this financial crisis and the Malaysia government has tried their best to cushion the economic. Organizations also cut down the employee welfare to lower their monthly expenses. The Watson Wyatt survey shows that 61% of employers expect their current financial performances to remain poor at least until the end of 2009. About half said they plan to increase their cost- snip actions in 2009 and beyond (Sarah, 2009). In view of recession, additional financial measures for welfare whitethorn not be possible. According to Sonal Shukla (2009), recession changed the work of work culture where cost-cutting plays a preponderating part. The first affected are the employee welfare. All the luxuries enjoyed by the employees are both veers or may come to a standstill.Furthermore, although the rewards system can motivate the employees to perform well and become the companys core competitive advantage, some of the organizations seldom provide the rewards system in their organizations. The employees will only get the aid or incentives once or twice a year but this is quite hard to motivate the employees. Most of the Asian companies still intimacy double-digit voluntary turnover rate like the India (13.8 percent) and China (10.3 percent). An organizations ability to hold back talent is a challenge approach all companies. This provides challenges to be more innovative in retaining the top people in the organizations with a tighter budget during the recession time (Salary Increases gloaming in Asia Pacific after unitary Year of Economic Turmoil, Hewitt yearbook Salary Increase Study Reports, 2009).Besides that, organizations in Malaysia rarely provide the self-improvement and the self-development environment for the employees. The employees will mazed their aspirations towards the organizations because they will feel that they cannot have any improvement in the organizations and they will resign the job. Employees will feel that the organizations are not pay wariness to their basic needs and the organizations will also lost the high productiveness workers and the turnover rate will be very high. This issue will become more serious during the economic downturn. According to Sarah (2009), during the recession time, most of the employers will intend to save the money by freezing salaries, bring down workweeks and eliminating the training programs and 18% intend to reduce or eliminate knowledge reim bursement and subsidized other financial perks.Lastly, the basic pay, or the salaries for the employees are very low amongst each companies. The fresh graduate with a bachelors degree can only command a basic salary ranging from RM1, 600 to RM3, 500, with a average of Rm2, 000 per month (Betty Yeoh, 2009). This issue becomes more serious after the world is having the economic down turn and the economic in each country are still very unstable. However, the low basic pay cannot mates with the real life that the employees are facing with. 2009 the actual salary increase rate went down by 4 percent and 8 percent singly and over 60 percent of responding companies keeping wages constant (Salary Increases Decline in Asia Pacific after One Year of Economic Turmoil, Hewitt Annual Salary Increase Study Reports, 2009). Now all the products prices increase the heart and soul expenses of each month become bigger and bigger but the salary still remains unchanged. The low basic pay will demoti vate the employees and the productiveness will also become very low. In short run, the low basic pay may cut down the total operating(a) expenses of the organizations but in long run, the quality of the products will decrease and the organizations need spend more money to increase their production.Based on the preceding(prenominal) scenarios, there is an urgent need for a deep discussion on the following problemThe cutting down of the welfares towards the employees in multinational companiesThe cutting down of the self-development and self-improvement activities in multinational companiesThe absence of the attractiveness of the incentives and gift in multinational companiesThe low basic pay in the multinational companiesResearch ObjectivesThere are three main objectives in this study, which areTo address the adoption of compensations and benefits in the multinational corporations.A well designed and managed compensations system can change the employees behaviour and their passion in their works, in order to improve their performance and productivity. The compensations may become a very critical in supporting managers to achieving the organizations goal. Furthermore, a good compensation system may also develop a positive organizational culture. It may influence the degree to which the employees view the organization is having the human resource-oriented, result based oriented and so on. Consequently, compensations not only influence on individual, but also affect the whole organization as a result.To consider the satisfaction towards compensations in the multinational companies will affect the performance.Compensations can be considered as the best ways to ensure performance at the individual level. The employees may perform well when they get the high job satisfactions from the compensations. However, there are some arguments that indicate that the compensations may not be able to assist the workers to enhance their performance, and it may also lead to a i nterdict organizational climate, which needs to use the compensations to motivate the workers and the absence of commitment to organizational objectives.To examine the satisfaction towards the benefits in the multinational companies will affect the performance.The main purpose for having the benefits is to motivate workers to perform split well. It plays a critical role in affecting individual performance. It is critical to make sure that the benefits systems are effective in motivating individual performance as the increasing of sizeableness of this systems in achieving organizations goal.Organization of PaperChapter one addresses the overview of multinational companies, the overview of multinational companies in Malaysia, the research problems, the objectives and the significance of the study. From the overviews, we will have the brief conception on what are multinational companies and the multinational companies in Malaysia. Besides that, from the research problems, we will no tice that what exactly happened around the world and we will commiserate what other researchers have found out from the significance of the study. Furthermore, form the objectives this part can know the main purposes to have this research.In chapter two will reviews issues that related on the compensations and the multinational corporations literature. The role of the multinational companies, the conflict amongst the multinational companies and the labour union in Malaysia will be reviews in Chapter 2. Furthermore, Chapter 2 will also explain what are compensations and benefits towards the employees, the types of compensations and benefits, the importance to have the compensations and benefits.In chapter three, will discuss the research method and the theoretical framework of the study. Chapter three also will present the development of the hypothesis to further signalize the relationships between the independent variables and the dependent variables. Besides that, Chapter three w ill also include the questionnaire that used in this study.In chapter 4, will discuss the results of the statistical analysis of the data and the hypothesis tested. We want to know that the results will match with the finding from other researchers.Lastly, chapter five will have a citywide discussion on the finding of this study, the limitations, recommendations and suggestions for future research.Chapter 2 Literature check outIntroductionIn this chapter, author presents the literature background on the multinational companies, the compensations and the benefits to the employees. Author will discuss the role of the multinational companies in Malaysia and their burden and the conflict amongst the multinational companies with employees.As noted in chapter one, the performance can be generally affected by the basic pay, performance related pay, the welfare, the employees development and the reward system (Jaime Bonache 2005 Sonal Shukla 2009 Yuanqing Zhou, Lei Lu, Bo Jiang, 2005 Jo hn Stredwick 2000). Therefore, in this chapter, relevant study background will be study to understand the types of the compensations and the benefits, and the importance to have the compensations and benefits.As workers or the employees are the manpower of the company, there is a need to examine what will motivate the workers or the employees to perform better by using the compensations and the benefits package. Additionally, employers need to identify which plan will be more suitable and preferable in motivating a certain performance.Foreign direct investment (FDI) represents one component of the international business flow and includes start-ups of new trading operations, as well as purchases of existing companies. Firms will choose to become multinational to reduce the direct and indirect costs, to reduce the capital costs, to reduce taxes, to reduce logistics costs, to overcome tariff barriers, to provide better customer service, to spread foreign exchange risks, to build alter native grant sources, to pre-empt potential competitors, to learn from topical anaesthetic suppliers, and to attract talent globally (Zubair M. Mohamed, Mohamed A. Youssef, 2004).According to Zubair M. Mohamed and Mohamed A. Youssef (2004), there are six strategic roles for foreign factories of multinational companies, they are off-shore factory, source factory, server factory, contributor factory, output factory, and the lead factory. An off-shore factory is completed to produce specific items at a inexpensive and then export for further rework or for resale. For the source factory, is also a low-cost production but gives topical anaesthetic managers authority over production planning, redesign, process changes, and out-bound logistics. The primary purpose of the server factory supplies specific national or regional markets. It typically provides a way to overcome tariff barriers, logistics costs, and word picture to foreign exchange fluctuations. Furthermore, a contributor f actory also serves a national or regional market, as developed as a source factory, has more powers to develop products, process engineering, sources of supply, and development of production capabilities. Besides that, an output factorys primary role is to collect information. They are located where competitors, research laboratories, or customers are located. Lastly, a lead factory creates new processes, products, and technologies for undefiled company. It should be noted that the choice of the factory not only influences the location, but also the operating decisions of the facility.The shorter product life cycles, fragmented and saturated markets, more demanding customers, consolidation and mergers of companies, and rapid advances in processes and technology always present a dynamic competitive situation. A firm need to made the decisions related to international locations, production strategy, and operations strategy when they decides to become an multinational companies (Zubai r M. Mohamed, Mohamed A. Youssef, 2004).heFrom the list of multinational companies in Malaysia (2009), there have 1690 multinational companies in Malaysia.The social occasion of Multinational CompaniesMultinational corporations have played an important role in globalization. Countries and sometimes sub national regions must compete against one some other for the establishment of multinational corporations facilities, and the subsequent tax revenue, employment, and economic activity. To compete, countries and regional political districts sometimes offer incentives to multinational corporations such as tax breaks, pledges of political assistance or improved infrastructure, or lax environmental and labour standards enforcement (Multimedia Corporation, 2009).In the fifty year from 1950 to 2000 world trade grew by a remarkable 1,700 percent. There is an unprecedented growth in both trade and international investment leading directly to a remarkable growth in living standards, not just in developed, industrialized world but also in many developing countries when there is a period of remarkable openness in the international economy (John Browne, 2002). Multinational companies expected to help develop the region where they operate by hiring local anaesthetic employees, providing training programs, sourcing locally and consequently supporting the local economy (Juliette Bennett, 2002).In addition, Juliette Bennett (2002) said that multinational organizations are increasingly drawing the private sector into the global initiative against corruption in order to encourage good governance and conflict prevention. When US multinational companies invest abroad, they usually introduce their management practices, along with production technology, into less developed countries (Daniel A. Sauers, Steven C.H. Lin, Jeff Kennedy, Jana Schrenkler, 2009).Besides that, according to Juliette Bennett (2002), good corporate governance at home and abroad, promoting economic inclusivene ss and companionship goodwill and it are very important elements of international security. The intercourse between the business and the government for the sharing skills and expertise can be valuable in promoting regional and global stability. Of course the multinational companies cannot and should not renew governments as the primary actors in international peacekeeping. However, multinational corporations working in partnerships with government and the civil society can use their business skills and financial leverage to promote regional stability.Furthermore, the multinational companies are a powerful vehicle for the transfer of not only the capital and other production functions but also managerial and technical knowledge across nations (Wenchuan Liu, 2004). Corporations have an interest in leveraging their skills and impact to promote stability in their areas of operation. All the multinational companies should bear some responsibility for the effects of their operations o n the local environment and population (Juliette Bennett 2002). There are a lot of constructive engagements drives by the multinational corporations. For examples, the use of solar power equipment to such as refrigerators which can store vital medicines in remote areas and the support for the creation of civil society in countries damaged by conflict and violence. There is a commitment from the multinational corporations to diversity founded not on quotas but based on the ability. Merit becomes the guiding factor which influences the multinational corporations approach to people everywhere (John Browne, 2002).Lastly, according to Juliette Bennett (2002), multinational companies can contribute to crisis management in conflict zones through commercial or philanthropic support for humanitarian relief and responsible management of security arrangements for the companys operations, thereby minimizing the risks of human rights abuses. Many cross-sector partnerships promote international s ecurity and research conflict prevention, crisis management and post-conflict reconstruction strategies that address the three principal causes of conflict corruption, want and social inequality.However, there is a strongly argued view that in the poorer countries of the world the role of multinationals is exploitative, environmentally damaging, and hostile to human rights and democracy, and divisive, destroying established communities. It distorts the process of development against the interests of local communities. It challenges protected niches, and established patterns of activity. It is disruptive and in places where the alteration mechanisms are imperfect of nonexistent it produces casualties (John Browne, 2002). Besides that, according to Juliette Bennett (2002), globalization creates poverty and inequality, which in turn create the motive for much violence. Juliette Bennett further explained that the private sector is proper more public-minded, while the public sector i s becoming more business-minded.The Influence of Multinational CompaniesAccording to Maral Muratbekova-Touron (2008), globalization processes during the past decades has led to the development of the large multinational companies expanding their activities across countries and continents. One of the main issues facing the development of the global companies has always been to find the right balance between the local autonomy between subsidiaries and the control of the corporate headquarters.Compared with domestic firms, the operation of multinational companies foreign subsidiary is complicated by the existence of the dual imperatives to serve both the needs of the parent company, and possibly of other sister subsidiaries (Riliang Qu, 2007). According to Zubair M. Mohamed and Mohamed A. Youssef (2004), the growing trend among multinational companies is to leverage organizational practices across their international subsidiaries in order to improve the worldwide use of their organiza tional skills as an important source of competitive advantage. Traditional thinking untrue that corporate head quarters of multinational companies are responsible for the decisions concerning the roles and the capabilities of the foreign subsidiaries. However in recent reach showed that in some circumstances the management at multinational companies foreign subsidiaries are responsible for delimitate the strategies and objectives of their subsidiaries, within the constraints set for their operation (Riliang Qu, 2007). According to Daniel A. Sauers, Steven C.H. Lin, Jeff Kennedy, Jana Schrenkler (2009), Multinational companies faced the problems relate to the cultural differences. Thus, subsidiaries and joint ventures face conflicting pressures from the parent firm and the local environment. The subsidiaries of multinational companies face pressures for both local adaptation and global consolidation when they operate in foreign countries.Furthermore, Riliang Qu (2007) has classifi ed subsidiaries roles within the intra-firm organisational cyberspaces of multinational companies into four categories, which are receptive, active, autonomous and quiescent subsidiaries.Receptive types of subsidiaries are highly corporate into the multinational companies network of operation and are given relatively little power in making their own decisions in relation to the local markets they serve. For the autonomous subsidiaries, are much less integrated to the multinational companies network operation and have a lot of autonomy powers. The following type is the quiescent type of subsidiaries,