The Hindu Business Line : Scope for autonomy

Fourteen months ago, the Standing Conference of Public Enterprises (SCOPE) recommended public sector company boards be empowered to fix salaries and perquisites so as to prevent talent, especially at management level, leaving for greener pastures. This empowerment, SCOPE felt, would be a far better human resource strategy for retaining talent than the existing practice of revising pay every ten years.

In what appears to be a rather belated response to SCOPE’s suggestion and three months after five million central government employees were granted wage hikes, the Cabinet cleared an average pay hike of 67 per cent for 250,000 executives and 120,000 non-unionised supervisory staff of public sector undertakings with retrospective effect from January 2007. The approval could not have been better timed coming as it does when lay-offs and salary cuts are becoming the rule for private sector firms in India and abroad. With the slowdown in the domestic economy faintly mirroring the recessionary trend in advanced countries, employees would be happy just to stick to their desks; however, public sector executives are getting an additional benefit of a pay hike. Most employees would feel the increments are long overdue since the practice of revising pay every ten years was an archaic form of evaluation that should have been abandoned long ago. That many PSUs, especially the navaratnas have performed competently in a competitive environment with their hands tied is a fitting testament to the managerial skills in most undertakings; not before time they have been rewarded. But have they? If the pay hikes appear appropriate for the policymaker as a gesture of optimism in these times of weakening market and industrial slowdown, they may also sound hollow to the employees precisely because they come during a slowdown. Unlike government employees whose bonanza will be footed by the government itself, the burden of the pay hikes for central PSU executives will be borne entirely by each enterprise. At this moment not many enterprises may have the muscle to bear the additional expenditure without affecting profitability; of the 224 PSUs, a little over half are profitable and only a third can actually implement the scheme “fully”. Officials admit the rest will phase it out but given the state of the economy just how far that will stretch into the future is anybody’s guess.

Welcome as the belated nod for salary hikes is, the Government must not use it as an argument for not granting greater autonomy on the issue of managerial compensation to the PSUs. All said and done, Boards and managements are the better judge of the best levels of executive pay.

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