Can we follow India’s example here in the USA?
If not for this BusinessWeek report, we wouldn’t have known that America lags behind one Asian country in terms of executive pay regulation. Recently, one of India’s richest businessman, Mukesh Ambani, announced that he’s willing to cap his salary at $3.3 million this year. That’s after following his brother, Anil, who was more courageous enough to forego all of his salary for the year. But that’s just a show of solidarity to the affected businesses in the country. What’s capping your salary for less than $4 million? You won’t be begging in the streets of New Delhi together with the millions of others.
The report also writes, “…India’s Companies Act of 1956 places caps on executive compensation that are linked to a public company’s net revenue. Executives who want to be paid more must apply to the government for special approval, which is hard to obtain. Bankers face additional scrutiny: Their salaries must be vetted by the central bank.”
For more than a year already, we’re hearing calls for the U.S. to regulate executive pay especially those banks that have received government financial backing. Just how many have become under fire for receiving millions despite their companies’ staggering revenues? Ken Lewis can stay silent this time.
But are we ready for a regulation such as India’s? We think not.
First, businesses will definitely accuse the government of pseudo-socialism by taking advantage of the recession. On the other hand, our politicians will be worrying where to source their campaign funds when they eventually lose private enterprises’ financial support.
Second, India has billions of people living under a dollar a day. When entrepreneurs hit big time, they began calling for these people to take interest in social consciousness (though some aren’t that concerned at all). Here in the country, the level of poverty isn’t as worse as in South Asia so we expect that once the economy goes down, people will hold an interest in equalizing disproportionate compensation. If the economy rebounds, there’s less interest in this concern.