Let Market Decide CEOs Salary

…a crooked neta can make billions behind the doors putting his country to a trap of foreign loans and global shame like poverty but a hardworking, genius professional cannot even take home government regulated huge pay purely for his work and merit that keep his company’s profits going up, and country’s exchequer in good health?…

Saurabh Dharmeshwari

When I, this past Sunday, heard our Corporate Affairs Minister Salmaan Khursheed talk of shareholders’ democracy in private companies, that is to say, regulating the ‘vulgar salary’ being paid to top CEOs, the first thing to assail me was a wave of sheer surprise, and perhaps, that of shock, too, for why a minister of a government that liberalized the markets and globalised the economy would speak like this, ever?

Anyway, the idea – for we Indians, for whom gateway of prosperity has been opened relatively most recently, are highly vulnerable to any discussion involving money – has grown into a full-fledged debate, hot and sizzling, no matter the point propounded by the minister is his personal take, with the UPA or even the Congress having no official stand on it hitherto.

To Khursheed’s utmost ideological triumph, various opinion polls on the topic, the graph of which published in newspapers or shown on TV channels, reveal that more people voted against than in favour of a section of highly privileged few taking home a colossal pay.  But, is the issue as simple as that? Is this the moral stand on the subject?

The whole global debate that recession has triggered and President Obama heated and flavoured seems slightly biased, as well; it just focuses on ‘greed’, not on sacrifice, there’re a good number of top CEOs, professional CEOs included, who, when their companies faced any financial crisis, received a token salary of a dollar for a long time.

Far away in the Europe and America, there’s a certain trend picking up these days, a debate on regulation on Industries’ fat cats in this tough time of recession, the US and President Barack Obama included in the wave, Khursheed, as a minister, makes it a ground to further his idea. Indutibly, it was greed, and nothing more than that, greed of a particular man/men that forced the whole world into a downturn, and enough greed has to be found in India, too (I hope Satyam story is fresh in your mind). Yet, is there a parallel in Indian, Western or American economy, requiring the same line of remedy? Absolutely, not. All of us know it even without being an economist or an economic expert.

The recession has recognized higher perks and greed as a problem of Western and the US economy, solving which will not only help economic slowdown there but also put these economies back on a track of permanent strength.  It’s not true in case of India, for our recession is not basically ours, it’s imported, and we’re among countries least affected by it. Higher salaries that CEOs and promoter CEOs – owner of companies – receive are negligible from a vintage point of global benchmark, and it’s genuinely doubtful that any regulation on these packages could help situation in India. In any way.

The whole global debate that recession has triggered and President Obama heated and flavoured seems slightly biased, as well; it just focuses on ‘greed’, not on sacrifice, there’re a good number of top CEOs, professional CEOs included, who, when their companies – Google, most striking example – faced any financial crisis, received a token salary of a dollar for a long time, as a step of self-regulation. It was well known long before recession appeared from somewhere to devastate our lives. Yes, markets properly respond to problems they face, so do companies. Clearly, Khursheed doesn’t have much to impress us with this point.

There’s another argument from our minister and his planning commission colleague Montek Singh Ahluwali. They want to carry austerity from dull South block to eye-glazing corporate world. Correct, the whole issue is fundamentally about three quite opposite entities, each of which has conflicting requisites, principles and values. The Congress party, it wants to assert its connection with Gharibs (I think it actually wants to strengthen gharib sense of gharib as Mayawati is doing in the case of dalits); the India Inc, it has to match global benchmark in every sphere to survive in globalised market; shareholders and trade unions, they want to regulate what top management gets.

Austerity in politics is still a confusing concept, not completely successful even in government. So why is this talk of taking it to corporate sector? Government legally cannot impose further tab on salary on Industry, with guidelines already being there. In this case, can Congress or a congressman force austerity on Industry that has to function on international parameters?

There’s an acceptance among people in India Inc, as reports suggest, that they, too, don’t like ostentation. Moreover, people like Narayanmurthy, Ratan Tata and all, pursue a level of austerity. They do it themselves and others in Industry, as is morality and ethics, have the option to follow it on their own if they find it necessary, it simply cannot be imposed. And what exactly a ‘vulgar’ or ‘indecent’ salary is, Rs 44 crore that Mukesh Ambani draws. Shouldn’t we give a thought to the matter that it’s just 0.29 per cent of his company’s net profit and he is following government norms, according to which salary of top management – promoter CEOs, professional CEOs, executive directors etc – must not exceed 10 per cent of total profit? Many companies are exercising self-regulation at present.

They say austerity should be there in corporate sector, for India is basically a poor country. To my mind, government cannot punish a laborious, genius sort with a hardly regulated package regime merely because it has failed on many a front; as it’s been unable to do away with poverty, hunger, diseases and uneducation, salary-related issues in medium and small-sized firms, things that have forced Congress to adopt austerity.

Regulation on private companies will not make poor better off or unemployed employed or less paid of small companies handsomely paid. The approach should be one of doing something for elevation and betterment of living conditions of downtrodden and helpless, not that of downgrading the level of well-to-do. It seems more or less die-hard communism, not austerity.

We have more important issues, then. Just before recession, there were interesting stories about ‘reverse brain drain’ in our leading news papers and magazines, breaking a surprise that foreigners are getting captivated to India for job. And of course, there was a check on brain drain with more people than before opting for India over the West or the US for job. A country that harbours ambition of becoming an ‘economic super power’ needs to capture best talent at home and then even hire it from abroad. A government regulation will smash into smithereens this ambition of ours. In addition, even existing professionals might be forced to fly abroad, leaving Indian industries in lurch, doomed for a regression.

Netas of today are excessively corrupt. They mint an unimaginable amount of money when in power, their black income is not one earned on labour and merit but greed. Do recession, austerity, transparency, democracy, and all such noble concepts that were raised in CEOs salary issue will ever be raised in the case of politicians’ secret earnings.

I admit that there’re companies where there’s not enough transparency in top management’s functioning, and promoter CEOs willfully enhance their perks but debates on such topics have to take place within CII or FICCI. For a fraud or illegal operation, there’re both law and agencies and an incident like Satyam must be a lesson for entire India Inc I believe. Country’s best companies, best talent and government exchequer cannot be made to suffer due to some scoundrels.

Netas of today are excessively corrupt, everybody knows. They mint an unimaginable amount of money when in power, and they do it misappropriating public funds, their black income is not one earned on labour and merit but greed. Do recession, austerity, transparency, democracy, and all such noble concepts that were raised in CEOs salary issue will ever be raised in the case of politicians’ secret earnings?

Do we want to be a country where a crook can make billions behind the doors putting his country to a trap of foreign loans and global shame like poverty but a hardworking, genius professional cannot even take home government regulated huge pay purely for his work and merit that keep his company’s profits going up and country’s exchequer in sound health?  Companies never pay anybody more than what he deserves even if they’re paying him millions and rules ensure these pays don’t eat into rights of others.

The professionals ensure profits to companies and more contribution to national exchequer in form of taxes. Something that would actually solve problem like poverty, hunger and so on, if money from exchequer is wisely and honestly spent.

Let markets decide the issue if India has to be an ‘economic super power’.