Deserved Fruits of Labor? Culture, Just-World Beliefs, and Preferences for Redistributive Incentive Schemes

Until recently, managers and business leaders have tended to assume that organizational reward systems are equally acceptable around the world. However, several recent high-profile failures highlight the potential hazards of applying a “one-size-fits-all” reward system around the world. For example, the failure of Wal-Mart’s entry into Germany has been attributed in part to its unwillingness to embrace egalitarian German wage-setting practices (Knorr and Arndt 2003). Similarly, the Lincoln Electric Company, the subject of the best-selling Harvard Business School case study, failed initially when it tried to expand abroad from the U.S. The CEO said executives had mistakenly assumed that all cultures would be equally receptive to the company’s performance pay system (Hastings 1999). The cultural acceptability of these systems, especially of “high-powered,” individual performance incentives (Lazear 2000), is also of increasing relevance in the context of growing income inequality (Plender 2012). Thus, the French government recently discussed limiting top executive salaries in state-controlled companies from exceeding those of the lowest-paid employees to a ratio of 20:1. What makes different incentive schemes more or less preferable in different cultures?