The world may be getting smaller, but delivering benefits programs to employees posted in foreign countries is not getting any easier, according to panelists at the CPBI Forum 2008 in Toronto.
Wednesday’s session on developing and implementing a pension and benefits program for the global workplace focused on issues of governance, financial reporting, international mobility, and cultural differences involving pension and benefits plans.
The four panelists discussed the merits of centralized versus decentralized governance and outlined their experiences. Elizabeth Cheng, head of compensation, pension and benefits at RBC Dexia Investor Services, said governance is the biggest challenge her firm has faced. “Lots of people, such as consultants, offer to help but governance is a very personal, corporate matter.” She explained that in the case of governance, change needs to come from the executive level. “Until someone changes their mind up top, that this is something that matters, the issue is not going anywhere. You have to have a change in thinking at the very top.”
Sylvie Charest, Manulife Financial’s vice-president, global pensions and benefits explained that her company considered a centralized approach to governance, but decided against it after a review. “We asked ourselves, should we have a global committee to look at all pension/benefits issues and the answer was a resounding no.” She outlined the fact that Manulife already has governance and audit committees in place, and that Canadian pension law was sufficient to provide proper guidance from the domestic aspect.
Étienne Brodeur, senior director, compensation, pension and benefits at Bombardier, said recent events have affected his company’s reporting practices. “We were hit very strongly by this perfect storm over the last couple of years, and it created a lot of attention at the corporate level.” He outlined Bombardier’s subsequent list of 150 items now included in their reports, and the discoveries that have been made as a result. “It’s a bit like archaeology. You never know when you’re going to make an interesting find.”
Brodeur explained that after the Enron accounting scandal, Bombardier had a Six Sigma engineer draw up a series of reporting processes to improve accountability. “As you can imagine this was difficult, seeing as the company is spread across 25 countries,” he said.
Rob Landry, Magna International’s chief counsel for labour relations & human resources governance said that international mobility is a factor that cannot be ignored by any company that plans to operate internationally. He explained that for either short-or long-term postings, pension and benefits plans are crucial to the success of the effort, as most employees are looking for extra perks to compensate them for the move.
This can be very difficult for plan sponsors, explained Landry, as standards vary from place to place, especially with regards to healthcare. “If you’re sending someone to Russia, you better have somebody who knows the local healthcare system because you don’t know what you’re getting,” he said. “Some jurisdictions are 30 to 40 years behind Western standards, and some employees will refuse to go unless their healthcare standards are met.” Landry added that in certain cases where healthcare issues could not be resolved locally, the best solution was to provide employees with cash, allowing them to make their own arrangements.
Cultural differences were described by the panelists as something best resolved on a case-by-case basis. Both Cheng and Landry explained how in certain countries, benefits such as life insurance or company shares were spurned by employees in favour of bicycle allowances or extended vacations. “Workers in an Asian country declined company shares and overtly said that they only planned on working for us for a year or two,” said Landry. Cheng said that because some countries have such generous pension schemes, the package offered by the company needs to provide something the employees need.
Charest described Manulife’s experience in Japan when they wanted to overhaul the company’s Japanese-style pension plan. In order for the Ministry of Health and Welfare to even consider the reform, they required 60% of union members to agree to the idea in principle. Management then fanned out across the country to sell the plan to the union. “In that case, culture is weaved into the plan design,” she said. “It’s weaved into how you need to deal with communications with your employees, and into the legislation.”
When asked about their greatest fear, the panelists offered different responses. Charest lamented the growing gap between the haves and have-nots of the pension industry. “The public sector has rich DC plans, and the private sector has less rich DC plans,” she said. Landry identified his biggest challenge as engaging employees in planning their retirement, and his biggest fear as employee inaction. “Unless we can engage employees,” he said, “the shift into DC is fraught with a lot of issues.”
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