http://desicritics.org/ Superior South Asian bloggers on Culture, Media, Politics, Sport, Business, and Technology. en Copyright 2006 by the authors Fri, 8 Jun 2007 17:01:39 EDT http://backend.userland.com/rss BC custom software http://desicritics.org/2007/05/26/002742.php#comment-217482 Reducing pay packages of executives in corporations would increase, not decrease, inequality. Suppose company A generates 1000 units of profits. It pays 200 units in salaries to top level executives numbering, say, 5. Which means each executive earns 40 units. Company A listens to the Indian PM and reduces the executives' salary to 30 units. Now the company would need to spend only 150 units in salaries, leaving it (the owner of that company) with 850 units. In the previous case, the company had only 800 units left because it spend 200 on salaries out of 1000. Tell me, in which case do you have more inequality? 40, 40, 40, 40, 40 and 800 OR 30, 30, 30, 30, 30 and 850? Greater pay packages for executives lessen inequality than perpetuate it because they transfer more wealth from the wealthy owner to the relatively less wealthy executive. I expect most people to point out to me that the above case was with respect to the company owner and the executives. With respect to the common man, greater executive pay packages seem to perpetuate inequality at first sight but this is an illusion because any common man is a potential well paid executive in a giant corporation. Companies recruit based on skills not on income levels, meaning companies always prefer a poor well skilled person to a filthy rich person with no skills at all. As long as you are a common man with reasonably good education and skills required for the job, you can become an executive - and that is GOOD for you (the common man) because you are going to be paid well. So what SHOULD the government be doing? IF IT IS REALLY CONCERNED about inequality, the first thing the government should be doing would be create skills by providing basics - education, books, scholarships. It should create opportunities for the common man to become a well paid executive i.e., create an environment where businesses can prosper - by creating more economic freedom by lessening bureaucratic control, by creating more infrastructure, by allowing more investment, by scrapping or modifying rigid labour laws etc. I bet the PM knows all this. This is basic economics. This is not something for which you go to Harvard. Maybe that speech was meant to please the leftwing nuts that infest the UPA like termites. 217482@desicritics.org Fri, 8 Jun 2007 17:01:39 EDT http://desicritics.org/2007/05/26/002742.php#comment-205720 Talk is cheap. Mr Manmohan Singhs Govt csn use some of his own medicine first. Take Air India. It is a national disgrace. Everyday there is news that a plane a. Could not take off because none cared to clean the toilet, b. Made an emergency landing because of misbehaving staff or mechanical trouble It exists because of its Govt. monopoly on its routes and Govt subsidy. The Civil Aviation Ministry blocks private carriers even Kerala Govt who want to start an airline to provide some competition to Air india. It carries 1.6 lakhs Haj Pilgrims, heavily subsidized by the Mr. Singh's Govt.to satisfy his vote bank politics. (Incidentally nobody in the world, even Pak does not subsidize Haj Pilgrims) It is the worst managed business in the world and a perpectual burden on the poor of India. This subsidy alone can take care of the educational needs all the poor in India. Ditto is the case with thousands of other Govt run business including the railways, which exist to please the power hungry Politicians and Bureaucracy. A good Example is a thousand times better than precept Mr Singh. Thanks you 205720@desicritics.org Sat, 26 May 2007 12:45:24 EDT http://desicritics.org/2007/05/26/002742.php#comment-205231 all Communists and Chinese-Mao-boot-lickers should stop using American and Western invented capitalistic stuff such as computers, internet, television, automobiles, aeroplanes, machinery, pharamceuticals, satellites, etc.......and go and sit in their mud-huts in Calcutta. 205231@desicritics.org Sat, 26 May 2007 02:34:54 EDT http://desicritics.org/2007/05/26/002742.php#comment-205229 tell that to the Americans first....... 205229@desicritics.org Sat, 26 May 2007 02:30:21 EDT http://desicritics.org/2007/05/26/002742.php#comment-205226 Yes, but there are no regulations on CEO salary. 205226@desicritics.org Sat, 26 May 2007 02:29:29 EDT http://desicritics.org/2007/05/26/002742.php#comment-205218 Ashish, I'm not talking about stockholders, I'm talking about regulating authorities. 205218@desicritics.org Sat, 26 May 2007 02:22:55 EDT http://desicritics.org/2007/05/26/002742.php#comment-205200 Even in India, companies that do not well face stock market fury, that in turn creates a reaction from financial institutions that own most of the companies. About Infosys, I believe that the company has an excellent PR. Its owners have made so much money from stock options that they can afford to claim low salaries. In addition, if you note all the discussion about promoter vs. professional managers, Infosys is still being run by its promoters. 205200@desicritics.org Sat, 26 May 2007 02:02:53 EDT http://desicritics.org/2007/05/26/002742.php#comment-205193 It is our inherent socialistic tendency (and maybe a sense of sour grapes) that we claim that CEO's earn such a lot. If companies are willing to pay them and get good returns, it is a very good investment. 205193@desicritics.org Sat, 26 May 2007 01:59:13 EDT http://desicritics.org/2007/05/26/002742.php#comment-205177 Our PM needs to spend someime reducing the gini coefficient rather than wasting time in such speeches. Since taking power I have not seen any significant initiaves in Population management (now that the word 'control/ planning' has been dumped- Vatican influence), in water management (water having been identified as a serious problem), infrastructure (with very little power/transport infra added) or in education (inefficiencies in the current system continue) As far as the issue itself is concerned, let markets decide who gets what salary. Managing an organisation and the associated pressures is not at all easy and I dont see a reason why one should not get rewarded for that. One of the arguments used in the west (John Edwards) talks about the ratio between the CEOs pay and lowest paid worker. What they ignore is the fact that the lowest paid worker in a large manufacturing unti makes more than enough to live to a good quality of life. 205177@desicritics.org Sat, 26 May 2007 01:43:39 EDT http://desicritics.org/2007/05/26/002742.php#comment-205117 You make excellent point w/re: Laloo and Mayawati and the rest vs. companies and CEOs. On the other hand, the PM, to give him the benefit of the doubt, is ahead of the curve in India by talking about big payouts to CEOs. This is a big issue in other parts of the world and given the sorry state of law in India, I bet CEOs who make a ton of cash in benefits and stock options in spite of their companies being driven into the ground won't face a tenth of the scrutiny they recieve elsewhere - although they might face ten times more "public sentiment". The Economist once ran a feature on Narayana Murthy lauding him for his modest pay package which was like a fraction of what other CEOs in his position were taking home. All things in moderation I guess. Although the govt has no business putting a cap on pay - that much I agree. 205117@desicritics.org Sat, 26 May 2007 00:52:45 EDT