The curbs on CEO-pay made sense when companies were being funded primarily by state-owned banks and the government was regularly taking over private sector firms which were made sick. In today’s day and age, when companies are funding themselves through the equity market and through debt raised overseas, the role of the government is quite different. The government, however, is free to ask CEOs to curtail expenses, as has been done in the US, when it is expected to bail them out.
If private airlines want a bailout package without even clearing their petrol bills with state-owned petroleum companies, there is a legitimate case for asking them to freeze their salaries. Why should the Indian taxpayer be funding the extravagant lifestyle and illogically-planned business ventures of a Vijay Mallya? It should be made mandatory that any company that wishes to pay its Director/CEO more than a certain proportion of its net profits must not have outstanding dues higher than a certain prudential limit — this will automatically ensure that the company is not getting rich by defaulting on anyone else’s payments, especially those in the public sector. Once this is done, there is no need for the government to step in.
Ashish Tandon, on email
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