government austerity

Salman Khurasheed, the minister for corporate affairs in the country, recently remarked about the pay packages of CEO’s and indirectly described their high income as ‘vulgar’. For the past few months now, ministers seem to be keen on initiating an ‘austerity drive’ as the popular phrase goes. Pranab mukherjee started it with his plans of curbing government expenditure by reducing security and other benefits enjoyed by ministers and supposedly ‘driving’ tharoor out of his hotel. But is austerity, just for the sake of it justified?

Firstly coming to the point of CEO salaries, i see no point of government interfering in employee salaries there. What a company and its shareholders decide to pay their employee and CEO is entirely their business and surely they are more worried about the company than the government, so they will know how to reward their CEO appropriately. Moreover a CEO works hard to get in a position to lead a corporation and whatever he earns is well deserved and justified , as in contrast to some of the ministers enjoying free perks for just showing up once in 5 years. Also, as H P Singhania (ficci president) pointed out, lack of compensation for employee efforts led to a brain drain 15-20 years ago as more and more people found foreign offers more lucrative and beneficial. We must make sure that this isn’t repeated. Sure economic downturn has caused a lot of changes all around that requires government intervention, but this is an issue that is best handled by the firm itself.

Having said this, i feel Pranab Mukherjee’ attempts to curb unnecessary government expenditure is well placed. Many ministers don’t require Z+ security, but are still covered by its shield. I agree security is important for political leaders, but security should be according to need and not to fulfil the minister’s desires. Besides this, controlling other perks like railway passes etc also seem to be a good move and not just because of the recession but in a stable economy also. Although if a politician wants to live flamboyantly on his own expense, its completely his decision and no one should bother about how he lives his life, as long as he isn’t spending the taxpayer’s money. All in all, i think government should think about reducing its expenditures first before bothering about company CEO’S.