Financial Daily from THE HINDU group of publications
Thursday, Sep 26, 2002
Bridging the Marx-market gulf
SPOKEN like a man. Yes, that is what Mr N. R. Narayana Murthy, Chairman of Infosys did when he, while addressing the "Leadership Summit" in the capital recently, laid down 15 times the lowest paid employee's salary as the maximum a CEO can take home as remuneration.
Now, had this come from anyone else, the pink press would have dismissed it as the rantings of a bleeding heart socialist.
But coming as it did from Mr Narayana Murthy, who is a capitalist with conscience, one hopes the suggestion will be examined dispassionately by all concerned not only in the immediate context in which it was made but on a wider front too.
In the CEO-driven US corporate sector, the gulf between a CEO's salary and the next employee in the pecking order is yawning.
In our own country too, the Managing Director often beats other executives by a country mile when it comes to the remuneration race.
Besides causing acute resentment in the lesser employees, often such largesse leaves the shareholders holding the can.
What Mr Narayana Murthy has suggested is drawing a Lakshman rekha if the lowest-paid employee is being paid Rs 4,000 a month, the top executive should not be paid anything more than Rs 60,000 a month because, otherwise, the entire company would be scandalised.
This rule of thumb cannot be assailed as regression to micro-management because nobody is trying to usher in a ceiling on top management remuneration.
What one is trying to do is to have a semblance of equity and fair-play in wage distribution.
At present, the top executives have the best of both the worlds by taking a hefty chunk of profits as remuneration when the going is good but insisting on minimum remuneration (Rs 48 lakh as per schedule XIII when a company is reasonably big) when profits are inadequate.
The irony of this regime is that even during the worst of times, the top management remuneration outstrips that of others by an embarrassingly huge margin.
The lopsided remuneration structure is, in fact, a reflection and extension of the obnoxious reward system of winner-takes-all that has come to mark all walks of life in our society.
A more equitable distribution is a consummation to be devoutly wished.
Nobody can say that the CEO alone is responsible for the prosperity or for the matter of that the adversity of a company.
If the rule of thumb laid down by Mr Narayana Murthy is taken seriously, a CEO pining for higher remuneration will have to bring about an across-the-board increase in salary levels which will be possible only if the overall profitability of the organisation improves.
In a way therefore Mr Narayana Murthy's formula is a panacea CEOs will strive hard in their own enlightened self-interest as well as in the interest of their organisation thus bringing about the much-talked-about synergy between the organisational and individual interests.
Critics may say that a CEO is also a risk-taker and, therefore, needs to be rewarded specially.
Yes, he must be. But not as an employee, but as an entrepreneur.
Let us not mix up his two roles. In India, often a CEO wears two hats. As an investor he must seek his reward elsewhere.
Mr Narayana Murthy had spoken in the context of CEO remuneration.
But what he has said has a larger message for policy-makers in bridging the perceived gulf between Marx and the Market.
Let us by all means unfetter our businesses.
But while so doing, let us not give short shrift to the interest of the man at the bottom.
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |
Copyright © 2002, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line