Till recession hit globally, India had grown phenomenally at more than 8% per year for couple of years. This was possible due to the growth of many sectors primarily among them – Telecom, IT, Manufacturing to name a few. And this phenomenal growth also led to the ballooning of CEO salaries across organizations across various sectors.
This has led to adverse reactions from the general public at large. But more than that, our politicians have created a lot of hullabaloo over this matter over the years. Two recent moves have created more than a flutter among the corporate world –
- Setting up of a panel having former finance minister Mr. Yashwant Sinha as the head to fix remuneration of CEOs
- Distinguishing between independent and full time directors in terms of pay scales, benefits etc.
There are two sides to the coin to look at this issue.
Looking at the good intentions of this move –
CEO salaries have risen exorbitantly over the last couple of years which has resulted in a burgeoning gap between them and the middle and lower classes, This move will put an upper limit to that. In a country where still more than 60% of the population is below the poverty line, this move may streamline the salaries of the CEOs.
The recession around the world has resulted in loss of many jobs and having crazy salaries during that period shows the inequality in our society. The move to differentiate between independent and full time directors has been borne most probably out of the Satyam fiasco.
But there a lot of negatives to this move too –
- Who are the MPs of our country to decide CEO salaries when they themselves keep asking for blatant increases?
- Many CEOs are paid so much because they deserve it from their work, experience and also the ability to steer organizations continuously ahead of their competitors
- The differentiation between full time and independent directors could scare away experts who may be hired as independent directors
I personally feel that the crazy salaries of the CEOs are not at all justified. But rather than Government Babu’s deciding a cap, it should probably be a panel of Industry experts and professionals who should…
What do you think about this move?