Proposing National Commission on wages........

Business Standard, October 4, 2012

Letters: Gross salaries

Business Standard / New Delhi Oct 04, 2012, 00:15 IST

This refers to Shyamal Majumdar’s column “Much ado about CEO pay” (Human Factor, September 28). When it comes to income and wealth, there is an urge to resist transparency after a certain level. The effort people make to justify the accumulation of wealth in certain pockets gives an impression that this resistance has roots in some real fear of exposure. The frequent averments about things being “legal” confound the confusion.

Kapil Sibal’s observation that “the government can now take decisions without fearing action by any other constitutional body”, in response to the apex court’s opinion on the presidential reference, gives an impression that once an act is cleared as “legal”, no power under the sun can raise an accusing finger against the person performing that act.

Last year, a CEO along with his wife accepted a total salary of Rs 128 crore. Another company that finds it difficult to manage its borrowings in thousands of crores has a CEO who spends in crores to maintain his lifestyle. Maruti increased the pay for its Manesar unit employees by 50 to 75 per cent in September. Nurses in several hospitals in India are paid starvation wages, while the hospitals for which they work make huge profits.

Put these stray issues together and it’s easy to endorse the view of the Stakeholders Empowerment Services that there is a governance and ethical issue hovering around the remuneration structure across the government, the public and private sector and the unorganised sector in India. It’s time for a National Commission on Remuneration Practices. The Commission should go into the adequacy of wages, minimum and maximum remuneration across sectors, their relationship to lifestyle needs of employees and paying capacity of employers, and the need to factor in social security needs like health care and old-age needs in wages.

M G Warrier Mumbai

...and cash facts

It may be a good idea to compute a new ratio of CEO pay by dividing it by market capitalisation of the company.

Companies with managements that are transparent will have a higher price/earnings ratio, hence a higher market capitalisation. Thus, the percentage of CEO pay will reduce and vice versa. If the writer computes this new ratio, he may find a new league table. We all know that the “profit” of a company depends on the accounting policies being followed, which vary from company to company. Managements have much leeway to swing this figure by playing around with depreciation, capital work in progress, inventory valuation policies, provisions for contingent liabilities, deferred tax computation and so on. Hence it is said profit is an “opinion”, while cash is a “fact”.

Tarnindar Singh Mumbai


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