Foreign executives in local organisations – country contexts and implications for practice in the Middle East
Findings from research on FELOs can be applied to organisations in other emerging economies. However, country contexts need to be taken into account. In addition, it is important in all cases to take LOCAL perspectives seriously (through gaining the participation and perspectives of representatives from local organisations). Research must carefully distinguish between global- and country-level influences on the FELO phenomenon, and organisational, group, and individual levels of investigation. FELO typologies assist in identifying which combinations produce successful outcomes (and those which are likely to fail). Insights gained from FELO research are relevant to government-sponsored development initiatives as well as executive search firms. The findings are of particular importance to emerging market firms and business practitioners in the context of internationalisation and globalisation.
Qatar, UAE, Saudi Arabia, Gulf States
Foreign executives are a relatively rare phenomenon in local organisations headquartered in the Middle East, partly because of the ‘al-Kafala’ (كفالة) system practiced in some countries. Kafala — in regard to employment and immigration regulations — is a system that is used to monitor foreign employees via local sponsors. Employers (kafil, كفيل) are responsible for the visa and legal status of foreigners and frequently require foreigners to surrender their passports. As many international executives do not feel comfortable with this practice, the Kafala system is viewed as a barrier to the hiring of foreign executives in local organisations. Other barriers include significant differences between terms stated in the Arabic and foreign versions of contracts, with the Arabic contract being the sole basis for any dispute. Formal contract disputes are rare as the Kafala system provides local organisations with powers to effect the withdrawal of visa from, and eviction or deportation of, foreign executives. Hence, recourse to local courts — although possible and potentially successful — is curtailed for the purpose of having contract disputes heard.
In contrast, executives of foreign multinational organisations in the Middle East (see note on classic expatriates versus self-initiated expatriates) do not usually experience difficulties with the Kafala system. Although foreign multinationals outside of free-trade zones frequently have local organisations as 51% equity majority ‘sleeping partner’, expatriate contract arrangements do not usually pose a problem. For FELOs however, abuse of Kafala by local organisations is reported and it is unlikely that the situation will improve unless the Kafala system is reformed. Anecdotal evidence indicates significant under-reporting of problems as the foreign executives concerned worry about the loss of their business relationships, professional reputations, career prospects and future earnings potential.
Nevertheless, some former FELOs report having enjoyed their work in local organisations, and are proud to have made significant contributions including strategic and structural change, knowledge transfer, mentoring of local talent, and internationalisation of business. Another aspect of the Kafala system in some Middle East countries — albeit illegal and therefore under reported — is that employment visas are held by one employer but used for work in another. This apparently suits all three parties involved: FELOs hold an official position in, for example, a private sector company but perform consulting work for a state-owned or government-linked organisation that cannot publicly be seen to appoint high-ranking foreign executives. Such triangle FELO relationships may improve the negotiation position of foreign executives, and are attractive to some private sector local organisations as a source of income and status. More . . .
Although Bahrain has repealed the Kafala system, and foreign employees are now permitted to change from one employer to another with a notice period of three months, enforcement of new laws against local organisations that abuse the traditional system is reportedly weak. Some local employers attempt to or continue to withhold wages and passports. More . . .
The country is dependent on foreign workers from, mostly, Indian sub-continent backgrounds. In contrast, foreign executives in local organisations generally experience a very generous working environment. Nevertheless, the Kafala system ignores fundamental employee rights and the exit visa system can be abused to prevent foreign executives from leaving the country without permission from the local organisation. As employer consent is required to leave the country or change position to another employer, the Kafala system can be used to exert pressure in regard to delayed wage payments. In the context of the 2022 FIFA football world championship, examples that have recently been highlighted in the media even include a football coach and a former Moroccan national player. In both cases, employment terms and wage payments were modified by local organisations utilising the Kafala system to exert pressure. More . . .
Along traditional skills shortages, the Kingdom of Saudi Arabia (KSA) continues to experience a shortage of foreign talent including experienced international executives, managers, entrepreneurs, experts in international trade, and finance specialists. It is estimated that foreigners constitute about 30% of residents and up to 70% of the productively employed population. Under the Kafala system practiced, local organisations assume responsibility for foreign executives, who require explicit employer permission to be granted before they can enter or leave the country, or transfer to another employer. In essence, aspects of employment and immigration administration are delegated to employers including not only state-owned enterprises, banks and government-linked organisations. The system extends to foreign executives in private sector companies and other foreign experts including academics in local universities. As many international executives see this as excessive control, positions in local organisations are only infrequently filled with the most suitable / most qualified managerial talent. In effect, the pool of international executives willing to accept FELO positions in the KSA is reduced. One FELO with extensive experience in local organisations describes Kafala as “restrictive” and emphasises as “crucial” the need for foreign executives to hold an ‘iqama’ (identification card) that allows travel within the kingdom, and to leave it without the need for an exit visa / specific permission from the employer. Abuse includes that foreigners are made to continue their work against their will or face non-payment of wages, and sign termination agreements that include trade-offs between wage or bonus payments owed and the permission to leave the country. Reports also include the failure of local organisations to transfer wage or bonus payments owed after permission to leave the country was granted. Other consequences of the Kafala system include that new contract terms after the expiry of an original fixed-term contract can be downgraded under duress. FELOs with respective experiences report feelings of “being owned by the employer” and “conditions akin to slavery”. More . . .