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Indian CEOs make 78 times the average annual wages of their workforce

Monday, 14 April 2014 - 5:52am IST | Place: Mumbai | Agency: dna
Gulf between CEO and worker salaries shows growing inequality

How egalitarian is India?

Well, if you go by the pronouncements of most legislators, India is trying very hard to promote equality. But when you examine numbers, there is clear evidence that the government has actually been promoting inequality.

The best example is the manner in which one of its legislators, Naveen Jindal, accounts for being paid 1,285 times the average annual wages of his workforce. He was the highest paid CEO and last year (2012-13) he was paid Rs 54.98 crore (the previous year he was paid even more – Rs73.42crore).

That is far higher than the national average of 78 times that the Indian CEO makes when compared to the average annual wages of his workforce. India is thus already one of the biggest promoters of inequality in the world, especially when compared with manufacturing companies like Germany, Japan and France (see table). Jindal's salary thus multiplies this inequality many times over.

But then India (and Jindal) is possibly trying to emulate the Americans, who have been one of the largest promoters of wage inequality. The average pay of the US CEO was 475 times the average workforce pay. And if that wasn't bad enough, watch how companies like JC Penny, A&F and Oracle have allowed this figure to jump to over a whopping 1,000 times. Jindal, possibly, was following this excellent example. It must be mentioned, however, that even the US is now trying to pass a legislation to prevent this runaway disparity between CEO wages and average workforce wages.

Compare this with Japan, Germany or France, where the CEO got under 15 times the average workforce pay. Germany (like Japan and France) does not allow finance companies to engage in several types of speculative activities, which in turn gently puts pressure on such companies' payouts to its CEOs. That is one reason why Germany has ensured that it's best brains move towards manufacturing, not banking and finance. That in turn prevents a mismatch between the wages offered by manufacturing companies and finance companies.

Compare this with India, where around 30% of IIT graduates drift to finance sector jobs, even after acquiring one of the most sought after engineering degrees in the country. In other words, these students took advantage of some of the best education at subsidised rates in the country, but failed to allow the country to benefit from the skills they developed as engineers. But don't blame the students. They will always drift to sectors where wages are the highest.

Instead blame India's policies, which allow financial institutions to offer those obscenely high pay packages and bonuses, which in turn is possible thanks to the 'innovative' practices they adopt. In fact, India has actually allowed finance companies to promote inequality.

Just look at how India has allowed banks to go almost scot-free, even in the face of damning evidence of money-laundering. It has not penalised bankers for giving out dud-loans which now turn up as bad-debts to be paid for by innocent taxpayers. And it allows global speculators unheard of tax breaks. Not surprisingly, the financial sector, which was meant to be a support industry, has become the primary attraction for most students.

Then consider how India promotes inequality through its regressive labour laws which have compelled many companies to stay small, in order to remain out of this regulation's restrictive provisions. Large manufacturing companies – Maruti Suzuki for instance – are therefore compelled to employ large numbers as contract workers. The difference in wages is staggering: contract workers get one-fourth to one-sixth the wages of regular (permanent) workers. The government's labour policies have thus created a sure-fire recipe for inequality and industrial discord.

All this sustains the feudal mindset that many of India's legislators are famous for. For further proof, one only needs to look at the perquisites, and display of power, that legislators have arrogated to themselves.




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