Last monsoon, our dear govt introduced - "Austerity Drive" for ministers and other public officials. Hope they would have saved billions. Now after "successfully" running the austerity drive - our "concerned" government wants to transfer this success to the corporate sector and hence a new formula - CEOs should check their salary.
The salary and incentive given to a CEO is linked with their productivity, risk appetite, selling ability, the return generated and other driving factor. No company pays a fat salary to an under productive leader.
high reward always comes with an inherent high level of risk. For ex - If anything goes wrong in the company, the first person that comes under the scanner is the CEO of the company. We have numerous example from last year's economic scenario. Top CEOs don't fear taking high degree of risks and hence they generate a big yields to the investors and other stakeholders and therefore they are rewarded with a fat salary hike and bonuses(A part of the profit). But if the business/risk fails, the same CEO would be sacked immediately.
On the other hand, in public sector there is, so far, no incentive to hard work and innovation and every single person is driven by same stick. And hence we find our govt offices so lethargic and energy less.
High salary of corporate employees can also be understood by their scarcity. We have very limited set of talents and the same skill keeps moving among different companies causing the labor price rise in private sector. Since every body wants the best talent to lead her company, they don't hesitate paying marginally more for pulling the employee from a different company. This can be understood by the success of ICICI, Infy, TCS and other top brand of India. Since independence, we had n number of banks but how many got the same success that K V Kamat achieved for ICICI in 10 years. They operated in the same market and among the same set of customers but with a magnificently different growth rates among the peers. Now should we really check the salary of these people. The moment we do this, their risk appetite would come down and this would hit the growth.
Well there may be some checking points in the private body, but still, govt should not interfere into the private business. We should note our GDP is majorly driven by services sector( contributes around 50%) and major chunk of this comes from the private corporates which are run by fat salaried people. This was never the case before. In a nutshell, the higher growth/return implies the "vulgar" salary and not implied by.
The govt would be better of checking it's own offices. Today corruption is a major problem in any govt offices. There are infinite number of things that govt should be fixing rather that advising corporate bodies. In a minor stint of 5 years of an MLA/MP, their wealth level rises 10 to 20 fold in general, but this does not happen with the CEOs.
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