Govt. speaks about putting limits to salaries of CEOs of private companies

[ViruRulez]

NEW DELHI: Having launched an austerity drive to check public expenditure, the government has advised India Inc to refrain from doling out "vulgar" salaries to CEOs. "I think when we are working on this (austerity), we can hardly say that we (will) shut our eyes on what salary the CEOs are going to take," corporate affairs minister Salman Khurshid said when asked how the government intends to control salaries of CEOs which at times appear vulgar. Pointing out that salaries of CEOs should be decided by shareholders, he said, "I don't think anyone in India today, in politics or outside politics ... has reached the level of liberalism where vulgarity is also a fundamental right. "Minister should not be judging who deserves what salary. We are moving away from control to regulation. But it doesn't mean that you are going to be completely free," he said. The issue regarding remuneration of company CEOs will be debated by the Parliamentary Standing Committee, which is scrutinising the provisions of the new Companies Bill tabled in the Lok Sabha in August, he said. "Let's get the opinion of the standing committee (on the Bill), then we will move forward," he said, pointing out that "it's now before the same Parliament that has supported this attitude of austerity ... Let us see what their views are." The annual remuneration of some CEOs work out to be Rs 50 crore, which is more than 12,500 times the per capita income in the country. Under the present Companies Act, companies have to take approval of the government before raising salaries of directors, if the increase is beyond a threshold. Noting that the issue of CEO's pay packages cannot go unnoticed, Khurshid said, "Prime Minister's indication to industry (has to be taken)... with paramount importance today, particularly we are trying to promote, inculcate a culture of austerity. "Nothing is to been in isolation. We have to see on what accountability and what responsibility is to be imposed on directors, CEOs of companies. We still haven't taken a final view on whether two persons can be taken as chairpersons and managing directors," the Minister said. Remuneration should commensurate with the qualifications of the individuals and time they spent, he said, adding there should be transparency in the working of various committees of a company. "The bottom-line should be the shareholders, but the shareholders are not suppose to decide things blind. Shareholders also must decide in certain context after particular information is made available to them," he added.

This is a really pathetic attitude. I dont think it is the government's job to interfere in private matters of the corporate sector. The CEO can receive 50 crores or 100 crores annual salary and I dont think govt. should be worried about it. The company is paying the CEOs based on the profits etc. and I dont think payment goes on blindly. Hope that such bill does not get passed as I do not want govt. restriction unless illegal in corporate India.

[Gambit]

What is this commie *******giri. If the govt were thinking of doing this in a PSU or companies with significant govt funding , it would be justified to an extent but they don't have the right to implement any such policy on a private business entity. Off topic but I was on the sealink yesterday. The toll tax for the sealink is about Rs.50 but since we were in a govt vehicle, we were waved through. Why should govt officials be exempted from paying this tax despite the fact that the very tax payers from whose money this was constructed have to pay a charge, everytime they use the bridge.

[Ram]

I don’t know how a govt. could legally impose a cap on CEO salaries. Even if they do, I am sure that move will be challenged in courts. Rain or shine, floods of famine, every private enterprise has the right to decide what it is going pay its CEOs. Its their money, they can choose what they want to do with it. What next? That individual citizens must practice austerity too? No one should spend too much on clothes?

[Lurker]

I don’t know how a govt. could legally impose a cap on CEO salaries. Even if they do, I am sure that move will be challenged in courts. Rain or shine, floods of famine, every private enterprise has the right to decide what it is going pay its CEOs. Its their money, they can choose what they want to do with it. What next? That individual citizens must practice austerity too? No one should spend too much on clothes?

They sure can if a law is passed to that effect by Parliament. The Judiciary wont be able to do anything about it. And yes I do agree we should start to see a CAP on CEO's salary. Heck we should start to see a CAP on most people's salary. A recent trip to India told me everything I needed to know about the gap between extremely rich and everyone else. The middle class is getting wiped out, and lets not even talk about the poor. My only worry is that these laws would be made by politicians who are even worse than the CEO themselves!

[ViruRulez]

They sure can if a law is passed to that effect by Parliament. The Judiciary wont be able to do anything about it. And yes I do agree we should start to see a CAP on CEO's salary. Heck we should start to see a CAP on most people's salary. A recent trip to India told me everything I needed to know about the gap between extremely rich and everyone else. The middle class is getting wiped out, and lets not even talk about the poor. My only worry is that these laws would be made by politicians who are even worse than the CEO themselves!

Do you follow communist idealogy :hmmm: I agree that there is difference between rich and poor but the proper and democratic way of doing this is to give proper education and amenities to the poor so that they can also gain success in life. Forcing private sector on anything unless it is illegal is not right for sure.

[Lurker]

Do you follow communist idealogy :hmmm: I agree that there is difference between rich and poor but the proper and democratic way of doing this is to give proper education and amenities to the poor so that they can also gain success in life. Forcing private sector on anything unless it is illegal is not right for sure.

Wow! That is something Queen Antoinette would have said. This year in most parts of India summer had been unforgiving, no rains, and rice crops died. The poor farmer was looking at winter to have wheat crops, and with the rains happening they are going to die as well! You want these folks who have nothing to fall back upon to read and get educated when they can not even survive? Seriously what world do you live in?? By the way what makes you think education = good living in India these days? I have often said how educated Doctors are finding it hard to get a half-decent place to live in most modern metros today. Forget about a bank clerk. Yes I do stand by the weird salary structure in India. If that makes me a Communists so be it. xxx

[punjabi_khota]

Another reason for the entrepreneurs to leave India. Engineers to chale gaye, ab businessmen bhi chale jaayenge.

[Lurker]

Another reason for the entrepreneurs to leave India. ngineers to chale gaye' date=' ab businessmen bhi chale jaayenge.[/quote'] Quite a simple way of looking at the scheme of things really. By the way I thought CEO were supposed to be professionals and not businessmen :hmmm:

[punjabi_khota]

Quite a simple way of looking at the scheme of things really. By the way I thought CEO were supposed to be professionals and not businessmen :hmmm:

A reason why higher % of IIM students traditionally stayed in India than say IIT students is because although India may not have the best facilities for R&D, the opportunities for business are endless considering the huge market which is getting bigger everyday. If you put a cap on salaries for CEOs, then basically you are gonna see the flight out of India for IIM grads too. What about multinational companies who have foreign staff working in India at top levels . Will their salaries be capped too ?

[Lurker]

A reason why higher % of IIM students traditionally stayed in India than say IIT students is because although India may not have the best facilities for R&D, the opportunities for business are endless considering the huge market which is getting bigger everyday.

That is again quite simplistic. People moved abroad NOT because of love for R&D yada yada, they simply moved for a better life. Atleast the bulk of them. Now this is totally fair as they have the right to live their life their way but lets not swing this as "love of science, lack of technology" blah blah. Put it this way, the majority of Indian immigrant population in the West today is made of Gujratis, South Indians, Punjabis, Marathis - all belonging to states that are either prosperous or on the way to prosperity. It is NOT that Biharis or Oriyas are exactly flocking from Canada to Southall is it? So why have the Punjabis not moved en-masse to Chandigarh or Southies to Hyderabad?? Obviously these days the facilities back India are quite good. Call a spade a spade. people move for better life, not because he/she was in love with the way Oracle was developing its clustered database environments

If you put a cap on salaries for CEOs, then basically you are gonna see the flight out of India for IIM grads too.

Isnt their already?? Most of these IIMs folks are either moving away, or work for multinationals that have operations abroad. Gone are the days when a TISCO was numero uno company for Management graduates, its all about BCG these days.

What about multinational companies who have foreign staff working in India at top levels . Will their salaries be capped too ?

Obviously not. This is like saying USA Govt. will cap the salary of SBI head in chicago. Doesnt work that way. However I am sure you have also heard about Obama Administration mulling over putting a cap on American Institutions, finance mostly. xxx

[BlueBlood]

They sure can if a law is passed to that effect by Parliament. The Judiciary wont be able to do anything about it. And yes I do agree we should start to see a CAP on CEO's salary. Heck we should start to see a CAP on most people's salary. A recent trip to India told me everything I needed to know about the gap between extremely rich and everyone else. The middle class is getting wiped out, and lets not even talk about the poor. My only worry is that these laws would be made by politicians who are even worse than the CEO themselves!

Putting a cap will do exactly the opposite of what you are suggesting. You put a cap on CEO salary - they will be compensated with shares like everyone in the US does. Steve Jobs and Warren Buffet take $1 salary every year - they get compensated on share or performance basically. Same thing will happen in India as Capital Gains tax is overall a lesser tax than income tax for big amounts. However, if you put cap on most top managerial positions like you are alluding to it will have a ripple effect where it will foster more people to be corrupt or lose their purchasing power due to less money and the ever-rising inflation which just isn't stopping in India and I don't think will ever stop. In effect the middle class will be wiped out more from this. The CEO pay has no effect on parity with Rich and Poor - that's a misnomer. The parity exists everywhere in the world - even more so in communist China. The solution isn't to cap income but rather to ensure more opportunities are created.

[punjabi_khota]

That is again quite simplistic. People moved abroad NOT because of love for R&D yada yada, they simply moved for a better life. Atleast the bulk of them. Now this is totally fair as they have the right to live their life their way but lets not swing this as "love of science, lack of technology" blah blah.

I know a bajillion engineers who get disappointed with the quality of work engineers have had to do in the past in India. When you work in an engineering firm and all the designs come from US, it is depressing. What the top class engineers demand are BOTH a). Better quality of work b). Better compensation.

Put it this way, the majority of Indian immigrant population in the West today is made of Gujratis, South Indians, Punjabis, Marathis - all belonging to states that are either prosperous or on the way to prosperity. It is NOT that Biharis or Oriyas are exactly flocking from Canada to Southall is it? So why have the Punjabis not moved en-masse to Chandigarh or Southies to Hyderabad?? Obviously these days the facilities back India are quite good. Call a spade a spade. people move for better life, not because he/she was in love with the way Oracle was developing its clustered database environments

I am not denying the money part, but definitely the quality of work is a big factor, whether you believe it or not. The top of line people want to do best work, and get best compensation for that. Simple as that.

Isnt their already?? Most of these IIMs folks are either moving away, or work for multinationals that have operations abroad. Gone are the days when a TISCO was numero uno company for Management graduates, its all about BCG these days.

No, not actually. Recently, a lot of IIM grads have started taking jobs in India because of the way market is growing in India. A job paying 20-30 lakhs PA in India is considered more lucrative than paying $150K in Manhattan by a lot of folks these days.

Obviously not. This is like saying USA Govt. will cap the salary of SBI head in chicago. Doesnt work that way. However I am sure you have also heard about Obama Administration mulling over putting a cap on American Institutions, finance mostly. xxx

Yes and it has not been passed and will never see the light of the day. $250k is WAY too low and usually bonuses (which can be 200% of base salary in banking/finance) will take care of it anyways.

[DomainK]

1. This is idiotic of the government. They have no right to decide how private money is used. This is illegal, can be challenged and can be reversed. 2. Marirs, AFAIK, if a government in majority tries to pass a dubious law, it can be challenged in the supreme court and it can be challenged by the supreme court and the CJ has the authority to stop it. Otherwise a wicked government, once in power, could take over the democracy by passing the required laws. 3. All political parties get the funds for the election campaigns from corporate houses. They will never ever do anything to annoy them all together. This is just a controversy that will die down slowly.

[Lurker]

In effect the middle class will be wiped out more from this. The CEO pay has no effect on parity with Rich and Poor - that's a misnomer. The parity exists everywhere in the world - even more so in communist China. The solution isn't to cap income but rather to ensure more opportunities are created.

Oh absolutely it does. Put it this way, the President of India earns X rupees. So any Govt employee by default will earn less than that(President being the titular head), unless there is a severe exception. There is no way a Police Inspector will earn more than what Pratibha Patil does. Same with CEOs. If there is a cap, by default that will translate into a salary restructuring for everyone within the organization. If this means getting more shares so be it. It might actually convince CEOs to work more efficiently and make more profits thereby gaining more by rising stocks. Of course this has to be done on pure performance and not some back door market manipulation. xxx

[Lurker]

I know a bajillion engineers who get disappointed with the quality of work engineers have had to do in the past in India. When you work in an engineering firm and all the designs come from US' date= it is depressing. What the top class engineers demand are BOTH a). Better quality of work b). Better compensation.

And things are very different today, is it? I remember starting a thread sometime back about how Indians are essentially piggy-backing on designs/developments done by other nations. The examples I had given was IT. Even after 30 years in industry(TCS the largest Indian IT companies) is still making money by body-shopping and hardly has any products to its name. Same with Infy, Wipro etc. The bulk of these companies comprise of people who make a ton of money(by Indian standards) so why have we not broken the glass ceiling by creating softwares that rock the world? And isnt there another thread somewhere celebrating an "Indian" Scientist winning Nobel prize?

I am not denying the money part, but definitely the quality of work is a big factor, whether you believe it or not. The top of line people want to do best work, and get best compensation for that. Simple as that.

I am not denying quality of work at all. However it is merely one aspect and dare I say in most cases not the clinching aspect. Like I said earlier I dont see Oracle Database developers fron India moving to USA so they can fulfill their desire to form the latest clustered database with absolutely no failovers. They move to USA for money, quality of life and often a chance to migrate. Simple as. xxx

[triam]

The way to go is atleast the Scandinivian path, which taxes the highest earners a higher % not the communist path. it basically will be a disaster.

[triam]

Lurker, if I remember correctly, didnt yu identify yourself as fiscally conservative and socially liberal? how does this fit into your personal ideology?

[Lurker]

Lurker' date=' if I remember correctly, didnt yu identify yourself as fiscally conservative and socially liberal? how does this fit into your personal ideology?[/quote'] Probably somewhere in between Triam. I am fiscally conservative in the sense I think people are responsible for their actions (hence my reservations against bailout of any kind;corporate and individual). I am also social liberal in the sense the Government has certain obligations towards the society(and vice versa) and we simply can not let everything happen in the name of democracy and rights. By the way Scandinavian model atleast needs to be explored very well even if we do not emulate it. As of now Indian model, from social to economic, is blindly aping United States and the thought scares me. xxx

[punjabi_khota]

And things are very different today' date=' is it?[/quote'] They are definitely getting better, especially in CS and ECE industry (I am not talking IT). A lot of my former batchmates are involved in startups that do exciting work, and some of them have gone so far to start a few ventures. Most of the work is cutting edge, and some of them are close to turning even. Technology has helped a lot in bringing this work to India.

I am not denying quality of work at all. However it is merely one aspect and dare I say in most cases not the clinching aspect. Like I said earlier I dont see Oracle Database developers fron India moving to USA so they can fulfill their desire to form the latest clustered database with absolutely no failovers. They move to USA for money, quality of life and often a chance to migrate. Simple as. xxx

Well as I see it, the quality of work and compensation are two sided of the same coin. You want to earn big bucks, sure, but you also want a job which is mentally stimulating. To achieve ONLY the first goal, you can either go to into management jobs (companies like P&G/McKinsey hire a lot from IITs..so lot of people who cared mostly about money or were interested in management type positions took this option) or you can go get a MS/PhD. and stay in technology sector and earn big bucks in US.

[ViruRulez]

Oh absolutely it does. Put it this way, the President of India earns X rupees. So any Govt employee by default will earn less than that(President being the titular head), unless there is a severe exception. There is no way a Police Inspector will earn more than what Pratibha Patil does. Same with CEOs. If there is a cap, by default that will translate into a salary restructuring for everyone within the organization. If this means getting more shares so be it. It might actually convince CEOs to work more efficiently and make more profits thereby gaining more by rising stocks. Of course this has to be done on pure performance and not some back door market manipulation. xxx

There is a huge difference between a Govt. employee and a private sector employee. It is right to cap the employees in the govt. offices because ultimately it is public money from the tax payers. But private companies has nothing to do with the govt. except paying tax. So, I dont think both can be even compared. If govt. starts interfering in the internal matters of companies then it will also hamper India's economic growth in the long run.

Probably somewhere in between Triam. I am fiscally conservative in the sense I think people are responsible for their actions (hence my reservations against bailout of any kind;corporate and individual). I am also social liberal in the sense the Government has certain obligations towards the society(and vice versa) and we simply can not let everything happen in the name of democracy and rights. By the way Scandinavian model atleast needs to be explored very well even if we do not emulate it. As of now Indian model, from social to economic, is blindly aping United States and the thought scares me. xxx

I agree with your statement that we simply cannot let everything happen in the name of democracy and rights. But a CEO of a company is not doing anything illegal or is not harming any other Indian citizen for which he/she should be punished. I consider your statement applicable to human rights activists etc. who support Maoists and terrorists in the name of Human rights but they are nowhere to be seen when there are actually required. I also consider it right for the actual criminals who use loopholes in the legal system and walk away free in a democracy.