Although credit markets are barely functioning, last I checked, there is still a real world out there. So after several weeks of digression, I figured I’d get back on point and on theme – addressing firm-level strategy issues. Believe it or not, there have been some interesting and newsworthy events not related to the words “credit” or “crunch”. Take this chart of executive pay across countries published by The Economist, for instance (see Executive Pay for original story).

According to the Hay Group study, executives in the Middle East, Russia, China, and a host of other developing countries are paid more than U.S. executives, once adjusted for taxes and cost of living (assuming that their cost of living adjustment appropriately corrects for exchange rate differences via some purchasing power parity mechanism).

I find these data absolutely fascinating, but not for the reasons cited by the authors of the study, who attribute the differences in pay to a “shortage of talent” in developing countries. This shortage, they suggest, results in the bidding up of wages for executives in those countries.

I will not dispute the assertion that there is a shortage of managerial talent in some countries. Moreover, the “managerial shortage” claim may hold explanatory power. However, to me, these data are more suggestive of the extreme income inequality in a majority of developing countries between the tiny fraction of “haves” and the overwhelming majority of “have nots”, …expressed in a way not captured by the the Gini index (see this wikipedia page for a general explanation of the index).

But I invite you to judge for yourself. For full details, and a downloadable copy of the study, visit the Hay Group’s World Pay Report.

This entry was posted on Tuesday, October 7th, 2008 at 7:43 pm and is filed under Corporate Strategy, International Strategy. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.