Babus should decide CEO compensation
Prime Minister Manmohan Singh called on Indian Industry to resist paying large salaries to CEOs and cautioned that not doing this could lead to social unrest. This was met with expect resistence from the industry. Sunil Mittal argued that legislation in capping corporate salaries was not appropriate, and that a shortage of skills was leading to the inflated pay checks.
If you ask me (and I know you will), this is a specious argument. Look at the amount of talent in Indian government services. The efficiency of Indian babudom proves that having a salary cap works. I see no reason why it wouldn't work in the private sector too.
Others argue that these salaries are justified and that the wealth of investors in these companies have increased at a greater rate than the increase in salaries. This too is disingenuous as shown in this article that points out how salaries of some CEOs have increased even as their companies' profits decreased. This shows that the separation between performance and compensation is not unique to babudom. Montek Singh Ahluwalia explained that the Prime Minister was not arguing for new legislation but was merely appealing to Indian industry's conscience, the existence of which is almost as certain as the efficiency of Indian bureaucracy and the integrity of our politicians.
Sucheta Dalal eloquently argues: "Nobody wants to go back to the bad old days when some bureaucrat in Delhi decided what managing directors would earn ...". Bad old days? No, no, those were the good days. Please write to the PMO and appeal for a return to the glory days. Also please forward this appeal to at least 5 of your friends in the next five minutes. Failure to do so will result in your tax returns being scrutinized with a fine comb, or your passport application mysteriously disappearing, or some other such "bad luck"... you know the drill.
2 comments:
Babu, don’t you think it’s a little suspicious that this matter has suddenly taken center-stage. After all, Indian CEOs take home merely 3% of an average American CEO’s pay. And considering that the Indian economy and stock market are a full 10% of that of the US, we’re a long way off from getting to a head. Since I am a big fan of the Indian bureaucracy and Babus such as yourself, I thought I’d dwell on why this topic has become “speech” worthy.
Please bear in mind that fat CEO payouts substantially lengthen the donor roster during political campaigns.
And since the government realizes that it has absolutely no control over corporate decisions anymore (think recent abortive attempt at reining in cement prices or the failed attempt towards affirmative action in private sector employment), Manny is trying every trick in the book to slenderize the much-anticipated bounty due to be doled out to public servants in the upcoming Sixth Pay Commission. Remember the last one under PC’s able command which drove India to bankruptcy? Yeah, our noble prime minister – who is himself worth Rs.4.0 crores – wants to ensure that few can now match up to his own net worth. Must be the wife talking...Trying to keep themselves within the richest 0.1% of the population. Else how could they possibly continue to hob-nob with Delhi’s jet set post-2009 (when he’s most likely to be relinquished from his position)!!
Why is it so surprising that CEO compensation has increased even as corporate profits decrease? Tomorrow Manny might use the same argument on you, saying “Let us consciously renounce the revise pay scales of 6th Pay Commission because our country’s consolidated fiscal deficit has gone from 6% of GDP (at the time of 5th) to 9% of GDP today.”
Moreover, young people are increasingly fired up about being young corporate CEOs and that means there is less talent available for the Babu pool, which translates into a greater workload on the existing Babus going forward.
Babu, with all your “friends” and “acquaintances” and the knowledge you and your ilk tend to encompass, I bet you’d make a fine CEO in one of my organizations. Perhaps you’d care to consider… and err… tone down the rhetoric will you… you’re shooting yourself in the foot. Who knows, some day our CEOs may actually get 10% of their American counterparts' paychecks!!
Dear anon (@May 28, 2007 3:10 PM):
I am two and a half months away from retiring from government service and so the 6th pay commission will only affect my pension. Fortunately, like other's of my ilk, my future was safe guarded through several well-timed donations to my retirement fund by some unnamed good samaritans. So, I'm personally going to be unaffected by the 6th pay commission which last I checked is unlikely to be announced until June 2008.
Hehehe, I liked your point about
not increasing babus' salaries because the fiscal depicit as a percentage of GDP has gone up. Fortunately, Indian babudom is mature enough to not allow things like performance, logic and minor hiccoughs in fiscal deficit befuddle important decisions like government spend.
I didn't get your point about the timing of this issue. Why should one be suspicious about the timing? The 6th pay commission won't be ready until June 2008 and the next elections are not until 2009. Or do you think it had to do with how congress did in the UP elections?
The comment that really startled me was, "I bet you’d make a fine CEO in one of my organizations". One of your organizations? Wow! How many are there?
With my impending retirement, I am contemplating different job options that would not require me to work. [See http://babunation.blogspot.com/2007/04/there-is-still-hope.html Please let me know how to apply to one of your organizations.
Thanks for stopping by.
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