Montek bats for CEOs' pay cut

Honchos salary issue: Remarks likely to intensify debate

"There is a point in cutting the high salary. The corporate sector must address this," Ahluwalia told news persons during the launch of United Nation Development Programme's 2009 Human Development Report.

Though he felt "justifiable rationale" behind suggestions to cut salaries of several chief executives in Indian firms, he failed to elaborate further on the subject.
Corporate Affairs Minister Salman Khurshid triggered the debate on Sunday when he suggested that Indian companies must stop paying hefty pay packets to their top executives.

He even hinted that the government should keep a watch on executive compensation.
Khurshid's comments come at a time when the government has embarked upon an ambitious austerity programme to save public finances. The decision was taken in the wake of the worsening drought situation in the country, which may warrant massive rescue programme.

While unveiling the austerity measures, Finance Minister Pranab Mukherjee had suggested that Central ministers and MPs belonging to the Congress party must show their solidarity with the drought-hit people by agreeing for a salary cut.

The forthcoming elections in three states, including the politically important state of Maharashtra, prompted the Congress to mount pressure on the government to undertake the austerity measures, as it would reassure voters.

The Assembly elections are the first major test of the Congress-led UPA government's popularity since its unexpectedly strong performance in the Lok Sabha elections earlier this year.

Though Khurshid's suggestion for a salary cut appears to go with the government's own austerity measures, Prime Minister Manmohan Singh had counselled Indian Inc to desist from paying huge salaries to the chief executives.

Addressing a conclave of industry captains in 2007, Singh had asked them to avoid "excessive remuneration" and "discourage conspicuous consumption" warning  that it would result in social inequality and unrest.

The industry appears to have been annoyed by Khurshid's recommendation of salary cut for the CEOs.

FICCI President Harsh Pati Singhania said India's attempts to curb executive compensation would turn talent and capital away from its shores.

"As per Ministry of Company Affairs guidelines, the compensation of all directors cannot exceed 11 per cent of the company's total profits…. While these regulations are in place, adding more to it would be unnecessary," he said.

Virtually countering Khurshid's suggestion to cut CEOs' salaries, ASSOCHAM released a study saying that while the need for austerity in trying times is understandable, India Inc cannot ignore that market forces determine salaries to attract the best talent in the highly competitive global environment.

Lead a simple life: Khurshid

Corporate Affairs Minister Salman Khurshid, who favoured trimming pay packets of India Inc CEOs, on Monday advised them to lead a simple life, reports PTI from New Delhi.
“A year ago, the prime minister indicated that we in this country (are) grappling with enormous issues like poverty etc... We follow the footsteps of Mahatma Gandhi and trying to lead our life with much simplicity,” he told reporters on the sidelines of Central Wakf Council meeting here.

Khurshid said: “Display of affluence is unacceptable... I am not saying it is a rigid framework under which all of us should fall. It is an aspirational matter”. He said: “It is impossible to say that we will shut our eyes and let anybody do what they please but at the same I cannot say we will bring a regime of control.”