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Government double standards: Reduce CEO pay, but we'll keep our bungalows

A government dictat, or the threat of it, does not rile me much anymore; especially when the Congress government rules. Oh well, any government, but they’ve had the biggest chunk of time in power. Still, once in a while, their spokespersons make statements that are simply intolerable because they reek of double standards.

Salman Khursheed is our Minister of State for Corporate Affairs. (which, incidentally, does not involve snooping into whether Bharti went to bed with Vodafone, though that might be a better use of his time). He went on the rampage against “vulgar” salaries being paid by the private sector to their CEOs, saying that he could “hardly shut his eyes on what salary CEOs are going to take”. We can be liberal, he said, but not vulgar, referring perhaps to the fact that some people other than politicians have actually made some money and worked hard, which must be anathema to the Congress Party.

This stinks. The government spends an obscene amount of money in Delhi just propping up people like Khursheed. He stays, supposedly, at 2, Motilal Nehru Place,New Delhi-110011 which is in the heart of Lutyen’s Delhi. That house is probably worth 50 crores now, but let’s just take the rental value – about Rs. 10 lakhs per month? Why not give it up, and go live in a house in Delhi that he OWNS, if he wants to be austere? Why foist his austerity on us, when it was his government’s stupid policy of forgiving farmer loans, overpaying fertilizer subsidies and running obscene oil subsidy bills?

That 10 lakhs a month adds up to a fair bit, one would think, for a person whose primary role seems to be to keep making silly statements. But it doesn’t end there. We, the tax payers, pay for their servants, their transport, their security, their phone bills and of course the few crores they spend when they scream and rant and adjourn parliament because they want to do su-su.

Choices: a) we spend our money, or b) they spend our money. That decision, to me, is very easy.

Khursheed warns against being ostentatious. Oh yes, having FOUR cars is not very austentatious; his wife and him own a Scorpio, a Gypsy, a Jeep and an Innova. He owns a flat in Delhi and 11 acres in Farrukhabad, UP. Khursheed’s has declared 75 lakhs in FDs in only his name. And this is just the declared assets; which we must believe is all he has, otherwise we are vulgar.

CEO pay has been debated in a lot of countries; the latest is to limit bonuses and make them more in line with real profits (not ones invented out of thin air). That is perfectly understandable. But to limit salaries in what is a real profit making enterprise is overreaching and unnecessary; after all such salaries involve payment of tax to the government (rather than keeping them in a zero-tax SEZ or something), and then the money is spent so the money trickles down to those who don’t have it.

When a company like Reliance, which makes a NET profit of over 15,000 cr. per annum, pays its CEO a salary, including perks, of Rs. 44 cr. , it is hardly “vulgar”. But to understand that will require the application of logic, and I must beat myself with a stick for expecting too much of our politicians.

I say spend it. We’ve saved way too much. They’re going to debase our currency anyway through inflation. Setting limits on CEO salaries is going to be a waste of time – they will find a way around it anyhow. Better, perhaps, to ask them to spend as much and more; some of that money will find its way to the poor, and some of it, FSM forbid, into government coffers as well.

Too much ranting. Sorry.

  • Siddharth says:

    >same feelings here Deepak.
    Isnt that a communist tone in Congress?
    Rip the rich and lure the poor.
    Bugger me, Even Shashi Tharoor tweeted sometime back naively asking if theres any corruption happening in MEA or alike?
    Logic is the key what you say.

    May be Congress wants to increase the hafta from corporates so whinging about their salaries.

  • Anonymous says:

    >Very well researched piece.

    1) Austerity applies only to the government because it lives off tax payer money. Austerity does not apply to citizens who earn their own living, and hence are free to choose what to do with their money.

    2) Also, if one takes the austerity argument too far then the country will slip into recession, as opposed to coming out of it. In fact during recessions, the rich should actually be encouraged to spend and live ostentatiously!

    3) CEO pay: If the government clamps down on it, companies can pay out huge dividends and make sure that the CEO is still well compensated (if the CEO is also a promoter and has a big shareholding).

    Either way, it appears that Salman Khurshed is just making some sycophantic noises that resonate with 10 Janpath. Also my guess is he wants to be on TV, like his colleague Kapil Sibal who keeps announcing ill informed education reforms just to keep the news media chattering.

    ~mk

  • BRS says:

    >You don't have to be sorry for calling a spade a spade.

  • Anonymous says:

    >Indian Government Stimulus is basically for wasteful expenditure of Ministers and Babus, it is not for infrastructure or stimulating real economy. That job is left to Entrepreuners and International Investors. Very clever strategy indeed.

    MK

  • Raghu says:

    >Cannt agree more with what you have said.

    It is display of sheer stupidity of our honorable ministers that they are not able to figure out, that US govt. wants to control compensation of those organizations to which govt. has bailed out. i.e It is the people's money meant for the survival of the organization and given by govt. They are not talking about private companies which are doing good.

    And what about the vulgar assets of our politicians! Should not just donate their declared assets say beyond 50L (Let us call it vulgar asset beyond 50L). I cannt figure how our humble politicians make such huge assets without even proper source of income!

    Congress and politicians keep away from hard earned money of hard working people. You are neither democratic, socialist or capitalist.

    Only word I can think of is this policy is "anarchic" in nature ….

  • Kamal says:

    >Its not double standards, rather lack of ideas and failure to implement good governance practices. Nothing has been done to remove endemic corruption and improve efficiencies, hence all this austerity and other measures. But then this is the bane of Indian politics regardless of the party in power.

  • P says:

    >Not just govt bungalows , they call themselves gandhiwadi but promote the elitist vip culture gandhi hated, and to keep up with diktat politics they enter economy class fly business class read the toi today
    “some'' ministers and MPs insisted on an upgrade — that is seats in business class — after boarding the aircraft on economy tickets.
    Some VVIPs, the Indian Commercial Pilots Association (ICPA) complained, even “forcibly occupy seats in J (business) class''.

    Well u can call it dbl standards but this is an old trick used by congress
    Sonias broad policy apes Indira and Baba is being systematically groomed for the gaddi.

  • Bingo says:

    >Ah, a fellow FSM Believer. You made my day.

    I'll add to what you said about US CEO compensation. US made noises about it only when Government had bailed out the companies with multi-billion dollar money supply. By that money, the US Government has, in a way, bought the company and any CEO bonus is in fact public money. About public money, as you noted, austerity is necessary.

    Moreover, if the company needed such huge "loans" from US government, they cannot exactly be termed good performing CEOs. In spite of such a humongous failure in doing their job they got huge bonus out of public money. Any anger against this is completely justified.

  • ttthakur says:

    >I fully agree with you and with all other comments on this post, about the hypocrisy and double standards of our politicians. But, can you justify the 44 crores paid to Mukesh Ambani when he gets dividends on the shares he owns? Similarly, I read Anil Ambani getting roughly 52 crores from his group companies.Does their inputs justify such huge compensation? Does Narayan Murthy or Nandan Nilenkani or Aziz Premji draw so much?
    Let them declare increased dividends which at least all minority shareholders will also get besides institutional investors, even if their holding is largest.
    ttthakur

  • Deepak Shenoy says:

    >Thakur: If you replace Anil or Mukesh and get external CEOs you will have to pay them at least that much money. Rs. 50 cr. or $10 million salary (including bonus) for Mukesh, who generates rs 20,000 cr. or $4 billion in profits? THat would be silly to deny. Anil generates about 10,000 cr and gets about the same – still very little as a percentage.

    Dividends are a waste of money – they are double taxed (ddt is 15%) for one. Then there is the fact that the money might be used for acquisitions, for growth funding and so on, only if there is no growth opp then the company shoudl give big dividends. Small shareholders have the prerogative to sell if they don't get dividend.

    Narayan Murthy or Azim Premji no longer manage the cos full time, but the CEO salaries in these companies are low (if they were to induct non promoter CEOS they would definitely need to pay them more)

    And why don't you complain about the fact that Infy doesn't give enough dividend? It is sitting with over 10K crores in it's bank account, doing nothing with it – not acquiring, not growing much. For the last four years!