Friday, May 25, 2007

Prime Minster advises frugality in speech to CII

Another attempt to appeal to the aam admi, or an attempt to play to the left gallery ? In a speech to the CII, the Prime Minister Manmohan Singh advised that the business fraternity should display a simpler life, and avoid public vulgar displays of wealth, as well as be more careful with setting the salaries of CEO's such that these salaries are kept in control.
One wonders about such advice ? I wonder where the Prime Minister is when political leaders invite thousands for weddings and use state assets for such occassions; witness the marriage of Lalu Prasad's children where babus were galvanised into action, witness the birthday celebrations of Mayawati in the past where massive celebrations where held. Even more, witness the enormous amount of pomp and show that goes into functions held in government facilities such as Hyderabad House (meant for banquets for state guests) and Rashtrapati Bhavan (where money is spent to maintain a figurehead). At leas the money spent by companies is money that belongs to the company; the waste indulged by the governmet is money that belongs to all of us, it is the tax that we pay out of our hard earned money and watch some minister or MP blowing up on a state sponsored junket to escape the summer heat.
Further, in order to make India competitive, it is Indian companies and Indian business that is going to do it, not the Government or its fossil PSU's. The Government has to give up the feeling that it can control what people can do, or even more, do an introspection and recognize that lectures of frugality and dispay of wealth are least suitable when it comes from politicians. A company depends on its CEO to run the business, and the fact that CEO incomes are pretty high is a measure of the importance assigned to the CEO. It is the CEO who is trusted by the shareholders to run the business, and the success or failure of the business is
assigned to the CEO. Just like we pay lots of money to film stars and highly successful sportsmen, the art of guiding a business is a rarified art. After all, power with responsibility is something that does not come easy to politicians; while power without responsibility is something that they can do with their left hand. A CEO on the other hand shoulders the responsibility for successes or failures.
Refer this article to read some reactions as well:

India Inc is divided over Prime Minister Manmohan Singh's advise to limit the CEOs' salaries, with CII and ASSOCHAM stating the remuneration should be left to companies themselves while FICCI said it would consider the issue.
"These things cannot be legislated. Shortage of skills in key areas at the top level is a serious and genuine problem specifically in the services industry, which is facing pressure of high salaries," the new president of the Confederation of Indian Industry, Sunil Mittal said.
Prime Minister in his address to the CII had said on Thursday that the industry should ‘resist excessive remuneration to promoters and senior executives and discourage conspicuous consumption’.

These are serious people, dependent on the government, and could not have afforded to laugh in the face of the Prime Minister when he made such comments. It would have been far better if they had used the occasion to question the Prime Minister about such things as the flip-flop over the SEZ issues, about the inability of the government to curb corruption in the country, about many ministries in the government that seem to be not doing anything, and so on. However, I guess when the Prime Minister talks about an issue seriously, they need to take heed.
Of course, industry need to have a social angle to their work and need to make sure society benefits as a measure of their progress, but modern industries have shareholders by the crores who have sunk their hard-earned money in these companies, and would rather that the company do what it can to make sure that it grows ethically; and if this involved paying to get the best person to run the company, then so be it.

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posted by Ashish Agarwal @ 11:24 AM