The Hindu Business Line : Corporate remuneration

ONE of the fuzzy areas of corporate governance is the fixing of norms and criteria for determining the remuneration of the chief executive and whole-time directors. The Securities and Exchange Board of India (SEBI) has not issued any guidelines laying down the approach different types of companies should follow in this respect.

The federations of industry and commerce have, on the other hand, been clamouring for the adoption of a "hands-off" policy by the regulator and the Government on the plea that a liberalised economy calls for unconditional liberation of economic players from all controls on corporate remuneration.

This is an untenable demand. Corporates function within a social and cultural milieu and they are not the be-all and end-all of all economic activities. In fact, industry accounts for only 27 per cent of the GDP, while only about 7 per cent of the total workforce work in the organised sector. Denizens of India Inc should not be seen to be greedy and grabbing when a predominantly large number of the population have to struggle for basic necessities.

Even if they do not fully subscribe to Gandhi's trusteeship concept in owning and running their companies, they, emulating the Mentor of Infosys, Mr Narayanamurthy, should set an example in leading a simple and unostentatious life.

Media in the US have been publishing horror stories of tycoons (mis)appropriating for themselves as remuneration more than 150 times the pay of the average worker. India's corporate chieftains owe it to the rest of their countrymen to ensure that the contagion witnessed in the US of wholesale plunder of corporate coffers by the CEOs for financing their lifestyles does not spread to India.

The SEBI too has an inescapable duty to monitor the quantum of managerial remuneration contained the disclosure statements provided by companies under section 302 of the Companies Act so that there is a broad parity among companies of similar size, scale of operations, nature of business and turnover, the rate of growth of emoluments for all categories is comparable, and the ratio between the lowest and the highest emoluments in the same firm is kept around 1:10, as had been recommended for public sector undertakings some time ago. Even by publishing the amounts received by the CEOs and the lowest category of worker it would be able to instill a sense of restraint.

B. S. RAGHAVAN

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