Vulgar salaries down down!!!

... or so our politicians would have us believe.

Having imposed cattle class on their ilk, the high-priests of austerity have turned to a new, softer target: executive salaries. Never mind, that in our so-called "liberal" economy, the Government has no locus standi on determining or even influencing salaries in private sector enterprise.

It is the owners of the enterprise, the shareholders who must decide what they want to pay their managers. If they believe that a CEO is worth paying Rs 50 crores, so be it, even though it might be 12,500 times the per capita GDP of India (as TOI informed us recently). Remember, there are many CEOs, including those of blue-chip companies, whose CEOs get paid far less. Far, far less, in fact.

That is the question investors (and perhaps the Government as the regulator) must try and solve. Why can some companies attract CEOs - highly experienced professionals - for a compensation of about Rs 1-5 crores whereas other companies end up paying 10-50 times as much? It is very obvious that owner-CEOs have a significantly higher level of compensation than professional-CEOs. In a large Indian telecom company, the owner Executive Chairman received almost 8 times as much compensation as the professional MD.

Are the public and institutional shareholders exercising any control or influence over executive compensation, particularly when the "executive" is a significant shareholder himself/herself? The blame, if any, must then lie with the "independent" Directors who are letting the promoters decide how much to pay themselves. (Btw, politicians have the same problem: MPs vote for their own salary hikes in Parliament.)

So, Mr. Minister, the answer does not lie in "regulating" executive compensation and/or asking for "restraint". The Government needs to ensure, through regulation and education, that our publicly listed companies behave like public companies, with active public shareholders (represented by strong, knowledgeable and truly independent Directors). We have too many private fiefdoms masquerading as public companies in India.
Upvote Upvoted 0
3 responses
Unbelievable! Politicians intimidate / swindle / cheat their way to power, raise their salaries, perks, amenities and previliges every chance they get, abuse their power, get family into jobs and choicest postings, all out of the taxes that are cut from our salaries, and now want to cut down people that actually earn what they get!
— Ashish
Agree! Nobody points out that 30% of the salary gets cut in direct taxes and at least an additional 10% in indirect taxes. And the consumption of goods / services because of these "vulgar" salaries has contributed to demand growth... Of course, all this is economics and not politics!
— Srinivasa Addepalli
Nowadays there is a tendency to regulate more and more from the Government side....Another recent case is attempt to regulate the tariffs of mobile services where atleast 7 operators are competing in a service area .... All these Ministers should be asked to pay commercial rent for the bunglows in the Lutyens Delhi where they are put up or all there perks should be quantified to see how much benefits are being accrued to them from the exchequer ...Atleast this will reveal the size of ice-berg's tip facilitating an over-all idea..The requirement of filing of assets prior to elections has revealed the tremendous progress which our Political class has enjoyed over the years leading to the impression that Politics is the most profitable business/ profession ....
— Praveen Sharma