[ashlil]

Originally Posted by Samurai

That's not the real issue. I don't see any problem with it, especially for a services company. Shareholders are highlighting a real problem for a wrong reason.

For me it is an ethical issue and a morale issue. Management can't run a company without the employees. I don't see why the CEO should make 50 times or 100 times the median pay. That's just greed. Hire a CEO who loves the challenge of running a company. It is a role like any, which require certain combination of skills. Let's not act like they have descended from heaven.

Well put. It takes the entire workforce to run the company. I think there should be a regulation, which should state that the raise for the top management cannot be more than the average raise for the workforce, percentage wise. This way, the top management (which decides on the workforce salary) has no incentive to pay less to the workforce in order to show more profit.

[theredliner]

Since automobile industry/economy slowdown has been a hot topic since the last couple of months, I've been wondering about this: Many of us here have been of the opinion that CEOs deserve the obscene amounts of pay they take home and that they fully deserve the credits for their respective companies' successes.

Considering that, how many CEOs have come forward to take responsibility for the downturn and slowdown in sales? How many have been fired? All I have heard is them talking about cutting down workforce and that many hundreds of thousands more of jobs would be lost. They have blamed everyone other than themselves. If the workforce is cut down in times of poor sales, is it right to pay the CEOs so much while letting the employees hardly taste any success during the times of good growth?

[ValarMorghulis]

The companies (most of them) voluntarily would never increase the wages of the workers to bring any sort of correlation between workers and management and any govt. interference should be objected to vehemently.
Companies are smart; you mandate wage increase and you'll witness majority of the workers then as contract employees bereft of other benefits, for example Uber.
What do you do then?
If the govt. interferes then it's doom already for we will be moving towards a communist society which is already a pretty defunct idea.


And as someone mentioned previously, what stops anyone from permeating this idea in other fields?
This is always a tricky situation especially brought about in a downturn. When the 2008 recession hit this was true for virtually every industry. You can't regulate this if you want the best talent.

[vermasach]

It's not a fair world out there. The salaries at different levels are also function of market's demand and supply.

At the junior level, the salaries are fixed. As one rises, the incentives, variables and performance related keep getting added and it becomes significant.

The CEOs are also reviewed for performance and face music when numbers are below expectation. They get fired and replaced. Many have to take deep salary cuts. The only thing is if the company can find someone better and trustworthy. Since the slow down is for the entire sector, we don't see heads rolling.
At the workers level, there will be job cuts but not salary cuts as it is mostly regulated. However at senior levels, increments and variables are badly hit.

[Samurai]

Originally Posted by vermasach

At the junior level, the salaries are fixed. As one rises, the incentives, variables and performance related keep getting added and it becomes significant.

Why? Is there any research data that suggests a correlation between pay and performance of a CEO?

Because Bloomberg did this study few years ago using data of 200 highly paid CEOs, found a startling result. All they got was a random scatter plot, which means no correlation.

https://www.motherjones.com/kevin-dr...akes-good-ceo/

Also, another research showed that over 10 years period, companies with lower-paid CEOs actually outperform their high-paid-executive counterparts. Specifically, the companies in the top 20 percent of highest paid CEOs saw much lower stock returns in a 10-year period than the 20 percent of companies who had the lowest paid CEOs.

Source : Look at page 12

[nakul0888]

Good lord , a lot of people these days seem to have dictatorial tendencies. Deciding for themselves what other people should do with their lives, how they should run business, how much should be pay structure, how much should be the product pricing..etc.
Hey if you think CEO pay for a company is too high, just do one thing, take your wallet out, buy out the company and then put in place the schemes you come up with. Problem solved.
Last thing this country needs is go to back to license raj days. Because we all know how well that worked out.

[octane_100]

I have voted for can't say/don't know as I did not agree with any of the choices. Wages are fixed, you cannot calibrate them depending on the company's performance. When you increase the fixed component of the wage, though it keeps the employees happy the company runs the risk of carrying too much burden when going gets tough. Having said that, I am for equitable compensation across the board and there has to be a company performance linked bonus component to be paid out to the bottom rung also. Albeit we are a small organization, we practice this policy!

[SmartCat]

Originally Posted by octane_100

Wages are fixed, you cannot calibrate them depending on the company's performance. When you increase the fixed component of the wage, though it keeps the employees happy the company runs the risk of carrying too much burden when going gets tough.

Depends on the industry. In service industry, what you say makes sense. But not in manufacturing, especially automobile industry.

- Based on my calculations, Maruti spends just 1.5% of their revenues as wages for shop floor workers and their managers. The guys who actually build the car for you.

- Rajiv Bajaj confirmed this (see previous page). He says Bajaj's employees costs (shopfloor workers + mid management + senior mgmt/directors wages) is just 3 to 4% of overall revenues.

Company management should atleast offer permanent positions for those who have worked in the company for 3 years. Such a move hardly affects profits, but improves the morale of the workforce multifold. Shopfloor worker wages going up from 1.5% to 2% of revenues hardly matters when input prices (raw materials) constitutes up to 70% of revenues.

[octane_100]

Originally Posted by SmartCat

Depends on the industry. In service industry, what you say makes sense. But not in manufacturing, especially automobile industry.

Sorry, I think I was not clear in my communication. I didn't advocate for a constant fixed wage but rather have the incremental percentage within a reasonable range. More than the sector, I feel the impact is based on the size of the industry. A small manufacturing firm (<10 cr annual revenues) will have wages as a percentage of its revenue in the high single digits. This will make a significant contribution to your costs when business slows down or doesn't grow in the same rate. Also, along with profitability it affects cash flow too (which at times becomes more important than margins) with an increased commitment on a monthly basis.



I hope you get the point what I am trying to make, as I am not the most articulate person here!

[aniyo]

Originally Posted by SmartCat

Company management should atleast offer permanent positions for those who have worked in the company for 3 years. Such a move hardly affects profits, but improves the morale of the workforce multifold. Shopfloor worker wages going up from 1.5% to 2% of revenues hardly matters when input prices (raw materials) constitutes up to 70% of revenues.

Offering permanent position has more of a political risk and not a Profit risk. It is much more difficult to release permanent employee than contract either owing to Union related reason or downturn related.

Not to forget that many companies have to make political donations during every election and politician use corporate to dispose of their lands for mega projects. There is much more to the story than meets the eye.

For all you know this could be orchestrated by Lobby and the government. If government reduces the tax rate, opposition has a right to cry foul saying this is "suit-boot ki sarkar". So maybe the government is setting things up for GST reduction. And I am dead sure, we as consumers will not benefit one bit. The prices will come back to current levels within 1 to 1.5 years

[srini1785]

Disclaimer : I did not read through the entire 97 posts before making this comment.

I was wondering if "private" companies like say TATA , Mahindra , TVS and Hero have a much higher pay disparity ratio than say a "true" public listed companies?.

Before you point out that the "Privates" are also listed , i would say that they are listed due to some inconvenient rule. These are pretty much monarchies.

[SmartCat]

Originally Posted by srini1785

I was wondering if "private" companies like say TATA , Mahindra , TVS and Hero have a much higher pay disparity ratio than say a "true" public listed companies?.

By law, all listed companies need to provide this data. So if you want to do a comparison, just look up a listed company's annual report PDF file and search for the keyword "MEDIAN".

From what I have seen in the manufacturing sector -

- Dull, boring industries like mining, metals, oil & gas etc do not have such large disparity in wages
- Hot, sexy consumer facing industries like automobiles, FMCG (toothpaste, detergent etc) have large disparity in wages.

[Samurai]

Originally Posted by nakul0888

Good lord , a lot of people these days seem to have dictatorial tendencies. Deciding for themselves what other people should do with their lives, how they should run business, how much should be pay structure, how much should be the product pricing..etc.

Are you still confused between political systems and economic systems? I thought I explained the difference last time we discussed.

Looks like you didn't take the advice from Matt Damn to read the book People's History of United States, which describes what happened in 19th century USA, when government didn't interfere in capitalism.

Originally Posted by nakul0888

Last thing this country needs is go to back to license raj days. Because we all know how well that worked out.

I agree, I was a working adult during the reforms of 1991. I know, lots of people think India turned from socialism to capitalism after 1991. What changed was regulation governing finance and industry. Starting and running a business became lot easier after 1991, because lots of red tape was removed. That unleashed lots of opportunities for Indian entrepreneurs. I would compare it with similar unleashing of opportunities when Rajiv Gandhi removed the restriction of import of computers and telecom technology in 1984. I was a direct beneficiary of this because I worked on telephony technology in the late 80s using computers, made possible by this shift in policy by Rajiv Gandhi. Check this 1989 article by CSM. Meanwhile, education/job reservations in various categories have only increased. PVN Rao actually implemented Mandal commission recommendation, lots of people don't realize that because it got hidden by the bigger event of financial reforms . Social programs have increased too, Only decrease in redistribution I can think of happened in 1997, when the tax slabs/rates were changed drastically. Don't confuse 1991 reforms with change in economic system. That didn't happen.

Anyway, back to the subject. You are thinking entirely using business economics reasoning. That is because business courses like B.Com/CA/MBA focus only on Business economics. But businesses need people to work in them. To understand people in business context, you need to also study socioeconomics, which is lot more complex than business economics. It is impossible to learn in a classroom. You have to work among the people who are affected by business decisions.

The topic of this thread falls entirely in the spectrum of socioeconomics. If you think it is only about demand and supply (as in business economics), you are sorely mistaken.

[civic-sense]

Who is to decide what is a fair compensation for a CEO? The "average worker"? A CEO, however high he is paid, will be replaced if he is not able to deliver results commensurate to his pay.

So if the management is happy to pay 300 times the pay of an average worker to the CEO why should the worker take offence of it? Rather than demonizing the CEO, the worker should "work" towards upgrading himself to the level of the CEO where he too could command the same kind of pay.

If greed is a sin, then envy is an even bigger sin.

[srini1785]

My point was not on the sector of activity of companies or about the law , rather it was about whether the ownership pattern have any effect on pay remuneration in companies.

Originally Posted by SmartCat

- Dull, boring industries like mining, metals, oil & gas etc do not have such large disparity in wages

In mining/metals : Coal india - PSU , Jindal / Aditya Birla - " Private ".

O&G : IOCL / BPCL / HPCL - PSU , Reliance / ESSAR - " Private"

Originally Posted by SmartCat

- Hot, sexy consumer facing industries like automobiles, FMCG (toothpaste, detergent etc) have large disparity in wages.

Same here :

Automobile : Renault , Merc - Public companies , TATA / Mahindra /TVS /Hero - "Private".

FMCG : HUL / ITC - Public , Dabur - " Private" ( Not sure).