Click to play videoThe economic slowdown is fast becoming a global cry for responsibility. In the US, President Barack Obama announced tough rules on executive compensation on Wednesday. A $5,00,000 annual pay cap for executives at companies getting taxpayer bailouts is part of a wider process to clamp down on excessive corporate pay.
In India, too, Chief Managing Director of Bharat Forge Baba Kalyani is taking a 20 per cent salary cut. Five lakh jobs in India have been lost in the last three months. But at the same time, four Indian CEOs have made it to the Forbes list of the world's richest CEOs.
The question that was being asked on CNN-IBN's Face the Nation was: 5 lakh workers lose job: Should CEOs take salary cuts?
On the panel of experts to debate the issue were Managing Partner Counselage, Suhel Seth; Head of CPM's Economic Cell Prasenjit Bose and CEO of Naukri.com Sanjeev Bikhchandani.
SOCIAL RESPONSIBILITY IN TIMES OF ECONOMIC CRISIS
Prasenjit Bose began the debate by saying, "It is good that such figures are coming out, but I still think these numbers are underestimated. It is much more than five lakh job losses. But India taking any step should not appear as a realisation of something that Obama is saying in the US. Income disparity in this country has widened on a huge scale in the past four-five years."
Referring to Baba Kalyani taking a 20 per cent salary cut, Suhel Seth said, "It is motivated feelings that will effectively work. If Baba Kalyani is taking a salary cut then he is sending a signal down the organisation that 'look I am willing to tighten my belt and so must the firm'."
"As far as the four CEOs making it to the Forbes list is concerned it is their network and not their compensation that is highlighted. Having said that, this is the time for frugality and demonstrable responsibility. It is not the time to build billion-dollar homes but to ensure that every worker has a livelihood," he added.
However, he disagreed with Bose over his Obama argument. "The spirit of what Obama said needs to be pursued even in this country," Seth argued.
When Sanjeev Bikhchandani, everyone wanted to know whether he would follow Baba Kalyani's example and take a cut in his pay.
To this Bikhchandani said, "In all likelihood yes. I don't decide my salary, it is done by the compensation committee. But one has to understand the difference between a promoter and professional CEOs. So long as the performance of the company and the CEO is being checked alongwith the talent in the market, it should be fair enough. But if a company is downsizing then the CEO should not be taking fat bonuses home."
The biggest problem with the economy today is that it is simply not generating enough jobs. Former finance minister P Chidambaram had said that a growing economy creates jobs but it seems that this is not holding true for India - at least in the present scenario where the job scene is bleak to say the least.
"If you want jobs to come back then you have to allow economic growth. In our third quarter there was massive credit crunch. Companies stopped buying and a lot of sectors were hit at the same time. So if you want recovery then you have to bring growth back into all these sectors," Bikhchandani said.
However, Bose argued saying, "The Government has admitted that the economy is still growing but despite that retrenchment is happening. So this brings the entire growth pattern into question. It is not just the growth figures alone, it is also about how you grow and where does the demand come from."
GROW IN A WAY THAT JOBS ARE CREATED
Seth continued the debate stating that India has altered the construct of her GDP in such a manner that agriculture was now only a 19 per cent part of the structure. "We have 55 per cent in services where there is the skeleton of BPOs. The tragedy is that we have created a hype about growth but we have not created livelihood," he said.
"The Government has stopped thinking a long time ago, including when Chidambaram was finance minister. Having said that, look at our entire banking system. Who are they lending to? They are lending to the Satyams of the world. The point is that we are squeezing credit where it is required the most. The Government has done precious little on infrastructure. This Government bails out rich real estate companies whose owners appear on Forbes covers and yet have a Rs 13,000 crore debt on their books. This is the shamefulness of our banking system," Seth added.
"The problem is not just about jobs, it is about the social security system. If people lose their jobs then there is nothing to fall back on," he added.
Some feel that maybe it is finally time for the Prime Minister himself to boost demand and spending as fast as he can to bring back a growth spurt.
"If I analyse the situation from a pure economic perspective, then it is not about just spurring growth. You have to spur growth in large sectors which are providing employment. The other thing to look out for is uneven growth if you don't have Government spending in a uniformed actualised manner," Seth reasoned.
"We haven't seen public spending on infrastructure, power. These are sectors of neglect. So you have got to address this dichotomy. But here is a Prime Minister who is recovering, a former finance minister who is much happier being Home Minister and in the present crisis, Finance an additional charge for External Affairs Minister Pranab Mukherjee. This is how seriously the Government is dealing with the economic downturn," he stated.
Bikhchandani, changing the subject, said that the Government should ensure growth all around and not just in specific sectors.
"We should remember that jobs are not going anywhere as long as growth is 8 or 9 per cent. Get the growth back and you will get the jobs back," he said.
But Bose cautioned saying, "Anyone who thinks that jobs will come back if we revive the old form of growth is posing a fundamentally wrong argument. We are still experiencing growth but jobs are still going away. How do you justify this?"
However, the debate meandered back to the CEO versus workers topic with Bikhchandani saying, "No company or CEO likes to sack people. Downsizing is a last resort when everything else has been exhausted."
Taking a cue from this argument, Seth said, "Ratan Tata sends off an e-mail to all his employees that we have to tighten our belts. My point is where are we showing demonstrable leadership in times of crisis?"
Referring to Bikhchandani's argument, Seth concluded the debate by saying, "It is not about CEOs not wanting to sack, it is about companies accumulating too much flab in the boom time. We saw the same case with airlines. Hiring should be controlled, but it is not."
FINAL SMS/WEB POLL RESULTS:
Yes: 95 per cent
No: 5 per cent
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