Prime Minister Manmohan Singh has advised industry to contain CEO salaries.
CEO jobs warrant skill sets, competencies, integrity and attitudes which are not plebeian. Most CEOs lead 24x7 schedules, with minimal personal lives. Persons with these attributes have to be remunerated in line with their market value. Moreover, salaries are a function of demand and supply. Surely, Singh knows that salaries of CEOs in the US and Europe are 10-20 times higher than those paid in India.
The government monitored salaries of directors between 1978 and 1983. A director’s salary had to be approved by the ministries of industry and of finance, when pay packets were Rs3,500-5,000 per month!
It was slapstick comedy! Imagine: eight levels of officers, from section officers, under secretaries, directors, joint secretaries, additional secretaries, secretaries, deputy ministers, and the minister himself, squandering the taxpayers’ time while pontificating on salaries of directors.
The traumatic drama continued if the director was an expatriate from Europe. Then, the odyssey of the file continued through another eight levels in the department of company affairs.
Whenever a manager got promoted to a director in the multinational company I worked for, there would be rejoicing at his home. However, I used to sigh with mortal grief. You see, it was my assignment to clear his remuneration from the mandarins in New Delhi. Every time a director got promoted, I would wear out a pair of Bata No. 8 shoes, trudging through three ministries and 24 levels of clearances. Sometimes the process took one to two years. Sometimes I wore out more than one pair of shoes. And my shoe costs were not reimbursed!
The result of the bizarre control was:
a) Companies commenced all types of crazy reimbursements to directors to pay them as per their market value.
b) Many qualified managers with potential, immigrated to the US, Europe and West Asia. Even today, Indian CEOs and managers are transforming Arab sheikhs in West Asia into millionaires and billionaires!
If senior executives are paid well, it will help to retain talent within the country. After all, we do not provide any social security, medical benefits or pensions to retired citizens, as many countries in the West do. After retirement, these CEOs have to fend for themselves. So, why should they not be paid internationally competitive salaries to enable them to save for lean, rainy, sick or old-age days?
A supplement in The Economist, on “Talent”, 13 October 2006, underscored the severe shortage of talent and skill in the world in the next few decades. Thus, if professionals are not paid competitive salaries in India, they will opt to work as expatriates.
I worked in Latin America, where local professionals were paid handsomely and the quality of life was excellent. Local managers were unwilling to be expatriated, even to alluring Europe, because the conditions at home were enticing. The corridor talk was that if you transfer a manager as an expatriate, he would quit the company.
A similar situation in India would be welcome, for it will enable retention of our best talent for accelerated development. Today, lamentably, when Mukesh Ambani builds a house to live, India rises in collective horror, in sheer jealousy!
Finance ministry officials have advised that the views of the Indian PM should be perceived as “advice given by a father to a son.” Well then: “Thanks very much, Papaji.”
Rajendra K. Aneja is CEO of a foods company in West Asia. He was MD of Unilever Tanzania, Africa. He has also written a book, Agenda for a New India. Your comments are welcome at firstname.lastname@example.org