Something interesting cropped up in the recent AGM of the Tata group. Shareholders questioned the justification of the abnormally high pay of the CEO of Tata’s IT business, TCS. The TCS boss, Mr. Natarajan Chandrasekaran took home a whopping 25 Crore rupees this year. That’s not all, he was paid an additional bonus of 10 Crore rupees. With that much money, you could sustain yourself and a couple of successive generations even if you did nothing for the rest of your life.
Now in another part of the country, removed from the corporate boardrooms, millions of Indians live on less than Rs. 25 a day. But hey, we’re talking about the 0.01% of the country here. Greed is not just good. It’s great. Never mind the empty slogans of the aam aadmi for fair income distribution.
The shareholders may complain, but they mustn’t forget that Mr. Natarajan is not alone. His Infosys counterpart Vishaal Sikka took home 49 Crore rupees. In the US, google’s CEO Sundar Pichai makes 300 Crores a year. That’s almost a Crore a day!
The remuneration of some of these CEOs is 500 to 1000 times the pay of the average employee. At such ratios, it is difficult to deny that wealth within these organizations is very unevenly distributed. The advocates of high pay might argue that the C-level executives deserve the amounts they get. After all, they take the million dollar decisions that shape the company’s future.
But isn’t it the base of the pyramid that determines its rigidity? Within an organization and in the society at large, it is always the bottom of the pyramid that propels it forward. This is a fact acknowledged only by political parties before elections. So by and large we remain ignorant of it.
But one can make a good case for fairer pay structures in an organisation. Socio-economic experiments in the past have revealed that higher pays incentivize employees to work harder, thus boosting productivity. Now if I were Tata group, I would deem it wise to invest in more number of people lower down rather than putting a lot of my money on one individual. A hundred motivated employees would be more productive than one over-paid executive.
The Tata’s would do well to heed shareholders’ advice. All corporate houses, in fact, should revise their pay structures to ensure fairness. They should hurry, or else an ‘Occupy Dalal Street’ may well be around the corner.
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Views presented in the article are those of the author and not of ED.