[Samurai]

Originally Posted by timuseravan

On the other hand, CEO or other higher management position is 24/7 365 days a year job! You cannot really be not at work at any time.

That statement was made by the CEO of a Fortune 50 company, he surely must know what a CEO job entails.

I too had my moment of Zen like that CEO. After 2008, my company went through some very tough times. Somewhere in 2014, while fussing around my Grand Vitara at the office parking lot, I was talking to the security guard who was standing here. I told him how the tough times has forced me to drive around in a 7 year old SUV. He sympathized with me, while having a strange look on his face. A little later it struck me. I was sharing my grief with a minimum wage worker who cycles to work. I was embarrassed. After thinking about it, I realised I had no real reason to replace my super reliable Grand Vitara. So I am still driving it around in 2018 without complaining.

Originally Posted by timuseravan

Excellent post smartcat! I am firmly in the demand/supply camp. Any attempts at regulation by Govt or any other agency has almost always lead to much bigger problems.

I used to think like this until the 2008 financial crash. But the hardships my company went through to survive the following decade, has gradually changed my thinking. No MBA course can drive home those lessons. I no more think CXOs are god's gift to the industry, and workers are pests to be tolerated. As V.Narayan nicely put, I have become a limited thinker.

[CoolFire]

I would fully agree with the concept that the disparity should not be this much. Highly profitable companies like Maruti or Hero can do it voluntarily.

However, the major reason holding them back would be that if the employees are paid much higher than market rates, the job will become so attractive that labour issues may crop up if later on employee lay offs or dismissals happen. Also, business cycles may change and if tomorrow if the companies are not profitable, wages once increased cannot be easily brought down.

As noted earlier in the thread, contract workers are the real losers. They earn less than one third of the permanent shop floor worker, with zero job security or retirement benefits. A big change on this is indeed needed, which again should be ideally first done voluntarily by profitable companies.

[blackwasp]

Thank you smartcat for this wonderful thread. I'm sure we have all spectra of people on our forum (right from junior levels to CEO) who can share their experiences. Not an automobile company directly, but I'd like to share my experience on remuneration from my time as a salesman.

Though Maruti dictates what incentives are to be given, rarely did we get full incentives. Base salary for a fresh salesman with no experience is around Rs. 10,000 in a city like Mumbai. With incentives, it could possibly go till 20-22k maximum. Rarely is the base salary increased by the dealerships. Reason being - why pay one guy 20k when you can get 2 more for 10k each? This mentality needs to change. Unfortunately, despite demonstrating the same in a much smaller scope (business generated vs. experience) to the owners, they were adamant on considering this foolish. This leaves no reason for a salesman to stick with the same dealership. And hence your sales advisor today in Maruti might be working in Hyundai after 6-8 months and Renault after another year or so. These keep on hopping from here to there.

Internal surveys must also be conducted on whether employees are happy with the remuneration they get. While I voted for Yes, I'm sure there are many companies out there whose employees are happy despite the upper management making a lot more than lower level employees.

Ideally, components of the salary must be a sum of fixed plus variable. This variable amount should be based on % yearly profits of the company. This way, when the company is doing good, the employees are rewards and in hard times, they are assured of a minimum income. Further, having a CEO who has worked from the ground up in a company will be more likely to take good decisions regarding salaries, working hours, job perks, problems, etc. on basis of this experience.

Another figure that calls for attention is the % of contract employees. While this is huge (50% or so), after talking to my uncle (senior HR in a large PSU) gave me large insights on this. Keeping some portion workers on contracts makes it possible to mitigate delays in production due to labour strikes. Most of the times, its either the permanent guys or the temp. guys who strike. Very rarely have both gone off work. There are many other reasons as well, but beyond the scope of this thread. Note: I'm not saying the contract guys be paid less, I think they should be at par as their permanent counterparts.

[mrinmoy_s]

Excellent thread! I voted YES.
It is a pan industry problem in India I feel. This ET article presents some of the data that I am personally aware of:

https://economictimes.indiatimes.com...w/63359591.cms

I work in one of the companies mentioned in the article and I have worked as Executive Assistant to the CEO for over a year and thus am privy of the salary bands across the organization and it is saddening to mention that the ET report does present almost correct figures.

The salaries of CEOs are not entirely decided by the shareholders. The salaries are just approved by them and the way it is presented in front of the shareholders is entirely the prerogative of the Executive Board. And it is often misused by over reporting the achievements of the top management and by not highlighting the need for overall salary reforms. I am aware of Travel allowances not revised for low & middle level employees since 2008 while for the top management these allowances are always at actuals. The abundant supply of entry level work forces (Engineers/Diplomas) and brand names let them get away with it without minding the attrition at lower levels. In fact, this is one of the reasons why the Indian conglomerates have climbed down the list of preferences of the IITs, NITs and other premier engineering colleges of India.

However, I do believe that in the long term Market forces will force these companies to either take corrective action or to perish.

[Samurai]

Originally Posted by mrinmoy_s

Excellent thread! I voted YES.
It is a pan industry problem in India I feel. This ET article presents some of the data that I am personally aware of:

https://economictimes.indiatimes.com...w/63359591.cms

Wow, this is worse than I thought.

Here we were discussing CEO vs Median salary in a company. The article you cited says the following.

Further, the median salary of the top senior executives is on average 243 times higher than the average salary for employees, according to data from Capitaline and annual reports.

The median salary of top executives is 243 times more than average salary of employees.

Considering the math, average salary is always higher than median salary. And here they are comparing median salary (lower value) of top executives, to average salary (higher value) of employees, to show a lower inequality. That means the ratio of CEO salary (highest) to the median salary (lower value) of employees, will be much higher than 243. Just another way how companies blur the facts by picking incorrect data sets.

PS: There is a caveat that the article writer was using average and median as synonyms. I am hoping he is not that ignorant.

[SmartCat]

Some more data on salaries in the manufacturing sector:

RESEARCH & DEVELOPMENT:



PRODUCTION



QUALITY ASSURANCE



Source: Michael Page India Salary Benchmark 2018
www.michaelpage.co.in

[Jeroen]

Originally Posted by smartcat

Some more data on salaries in the manufacturing sector:

It is an interesting table. Although I do have an issue with looking at salaries based on years of experience. It suggest that more experience gets you more salary.

As a salary system that is a dead end system. A salary should be based on a particular job. I.e. certain responsibiities, mandates and tasks to perform.

Only if you change the job content the salary should change accordingly. (i.e. you get more responsibilities, or more stuff to do). The only thing that could influence salary is an inflation correction.

Other than that I am very much opposed of increasing salaries based on years of experience. Only when your role becomes bigger should a salary increase to reflect that.

Within a particular job there is, in general, only so much you can add to it. At some point in time in order to get a bigger salary you need to move to a different, bigger role, i.e. a promotion.

In essence I believe performance has nothing to do with how much a certain role pays. Performance allows you to take on more responsibilities and move upwards more quickly.

Jeroen

[amoghchaphalkar]

Originally Posted by Jeroen

It is an interesting table. Although I do have an issue with looking at salaries based on years of experience. It suggest that more experience gets you more salary.

As a salary system that is a dead end system.

You, Sir, are one of the infinitesimal few who get it! If I could thank a post a thousand times, I would do it for this post.

I used to find it saddening (and depressing) to hear people around me say "I have X years of experience & therefore I MUST get paid XXXXX at a minimum". Now I just laugh at their stupidity.

Unfortunately, I have now come to realise that the service industry mindset & business model is to blame for that. When billing rates are tied to experience and not capability, this is bound to happen.

[Jeroen]

Originally Posted by amoghchaphalkar

"I have X years of experience & therefore I MUST get paid XXXXX at a minimum". .

Experience, in relation to renumeration, is a very inflated if not to say overrated term. I have come across many people trying to claim a salary increase or applying for a job with a certain salary because of xyz years of experience.

And when you start asking questions, the experience is just that, number of years in more or less similar jobs, maybe a few vertical promotions. So I am always a bit weary when interviewing candidates who hammer on about their years of experiences.

Experience, in order for it to be valuable, needs to be expressed in terms of real development, both in depth and broadly. That means you need to be able to show having taken on a multitude, of increasingly more complex tasks and responsibilities.

In specialist functions, what can you do that other with less experience can’t. Only doing them a bit faster/efficient is of course expected of somebody with a lot of years. But that’s default. There needs to be more.

In managerial positions you need to be able to demonstrate your increasing level of self propelling, needing less and less guidance and oversight. The higher up you get in an organisation the fewer the safety nets, the fewer excuses. It’s all down to you, there is nobody else.

Jeroen

[Samurai]

Originally Posted by Jeroen

Other than that I am very much opposed of increasing salaries based on years of experience. Only when your role becomes bigger should a salary increase to reflect that.

I agree. Unfortunately, this is a cultural baggage in India, and has been institutionalized. Pay is based on seniority, and this is very much the rule in government jobs and slightly less so in private jobs.

Even the roles are given based on seniority than performance. This often leads to situations where high performers are reporting to low performers, because of age difference. People expect promotions based on seniority too. Trying to change this situation often results in resentment and attrition. HR has to get really creative to manage these situations.

Another impact of this phenomena is ageism. People in 40s-50s who are looking for lesser roles are not even given a chance. If a 45 year old applies for a role that is typical held by a 35 year old in India, the HR will reject the resume without a second glance, let alone discuss the options with the candidate.

The role and salary must depend on the ability of the employee. Generally, a candidate more experienced in a role, has higher ability for that role. But that phenomena is not linear or universal. In most cases, their growth slows down and stops. Yes, Peter's principle can strike even within a role as more is expected from an experience person within a role. The people in top management should be those who are best fit for that role, and not the oldest employees around.

People who can take on the CXO roles are definitely rarer than the average employee. That is why CXO roles are paid higher. The question is by what factor. The reason why I chose option 1 in the thread poll is because that factor has gone totally out of whack. I feel CXO roles justify 20-30 times the median salary. I have interacted with CXOs of companies of all sizes in the couple decades. None of them are geniuses or so extraordinary that they command 100-200 times median salary. They are not celebrities who have millions of followers. They are just doing a demanding role, and they are replaceable. Business schools all around the world are minting business graduates every year.

Company management is a team game, and not an individual game where one player makes 100-200 times difference due to his/her presence. This is not about whether a company can afford it. They can definitely afford, which is how they are paying that much. It is about fairness, which has a direct impact on the morale within the company. No company can succeed without the bottom half of the company. They should not be treated like serf, and the CXOs should not be treated like royalty. Most of the world gave up feudalism long ago, why must we resurrect feudalism in the corporate world?

[am1m]

Originally Posted by Jeroen

A salary should be based on a particular job. I.e. certain responsibiities, mandates and tasks to perform.

Originally Posted by Jeroen

Only if you change the job content the salary should change accordingly.

Originally Posted by Jeroen

Other than that I am very much opposed of increasing salaries based on years of experience. Only when your role becomes bigger should a salary increase to reflect that.

Originally Posted by Samurai

People expect promotions based on seniority too.

Originally Posted by Samurai

People in 40s-50s who are looking for lesser roles are not even given a chance. If a 45 year old applies for a role that is typical held by a 35 year old in India, the HR will reject the resume without a second glance, let alone discuss the options with the candidate.

Originally Posted by Samurai

I feel CXO roles justify 20-30 times the median salary. I have interacted with CXOs of companies of all sizes in the couple decades. None of them are geniuses or so extraordinary that they command 100-200 times median salary. They are not celebrities who have millions of followers. They are just doing a demanding role, and they are replaceable.

Thank you both! It's heartening to see these conclusions being presented and affirmed by two people with so much real-world experience. Have always thought along these lines myself.

In my 16 years working in the IT industry, I've often wondered how different we really are from the government sector we love to poke fun at. In terms of demanding 'x increment' after 'y years of experience', we're identical! And I have yet to meet a C-level exec who justified the astronomical sums they earned. Perhaps I've been working at odd companies, but most often, these esteemed gentlemen would cause irreparable harm to the company's bottom-line or morale before leaving for greener pastures, where they'd do much the same thing!

[satishv1987]

It would also be pertinent to draw a comparison between salaries in the private sector & the public sector.

Salaries of blue collar workers in the public sector are way higher than what an equivalent position in the private sector would fetch. For e.g,. a sweeper in a Central PSU (Group D employee) would earn atleast 3 times as much as a sweeper in a private automobile manufacturer.

The reverse holds good for top management . The Cabinet Secretary ( the senior most bureaucrat) earns somewhere around 3.25 lakhs/month which is far lower than what a Senior Level Director in a IT product based MNC might earn.

This probably explains the mad scramble for government jobs (among the lower & middle classes) in India. The government job sector is overheated. We have lakhs of candidates vying for a handful of Group C/D jobs. Those that cannot make it eventually end up in low paying jobs in the private sector. On the other hand, we frequently see senior level bureaucrats making the switch to the private sector.

We all balk at State intervention in the labour markets. Yes, it goes against the spirit of free enterprise & capital markets. But in a developing society such as ours it is imperative that this wage inequality in the private sector is addressed in the long run. In the absence of universal healthcare & sizable social security ,the families of many of these blue collar workers in large private firms are just one death/accident away from falling below the poverty line. It is easy for people to sit in their ivory towers and criticize the government for not enacting labor reforms which make it easy to hire/fire workers. Maybe it would also be good to spare a thought for those on the lower end of the spectrum.

[ashokrajagopal]

This thread should fit in the Understanding Economics thread because there is no way a discussion is possible on this without some economics and social sciences coming in.

1.
Let me try to add a perspective. Especially to the side that goes with demand and supply. Obviously it is an important factor, the basic terms in economics that are used all around by non economists.
When you talk about demand and supply in "market", you should think about what constitutes a market, and more importantly a fair market.
For a fair, level playing market there has to be
a) A quality standard
b) An environmental standard
c) A labor standard.( salary fits here)

So, when we accolade the manufacturing hubs around the world, the above standards have to be reviewed.

2.
A second perspective.

The whole idea of productivity is completely based on using less and less humans for a given activity. Thats one way to go. Using lesser and lesser of limited resources like energy is another way to go. The definition of productivity is not just the one defined by the corporations.

3.
A third perspective, based on economic history.

Increase in CXO pay -- Increasing Corporate share repurchase -- decreasing labor benefits -- increase in contractual labor -- term of Thatcher and Reagan (nothing personal, just a different kind of politics)-- increase in using the best brains for the most menial finance sector jobs -- search of cheaper and cheaper manufacturing hubs globally

All the above things are connected. And you cant discuss one without spilling over to another.

4.
Adding a fourth one.
If you try to sideline this discussion to some sort of egalitarian idea that equates all salaries -- only because I saw even sports being brought in here as an analogy to prove a side.

"CEOs are making X times employees everywhere" -- This is not the problem.

"CEOs of corporations that make billions of dollars in profit after tax are making X times employees when real wages of employees are pathetic" -- this is the problem.

Do you see the difference ?
We wouldnt be discussing this if Kodak had such an equation in 2018. They have a justification for lower pay.

[Samurai]

Couple of interesting charts based on the data from Annual Survey of Industries (2011-12). Read the source for detailed analysis.

[SmartCat]

Originally Posted by ashokrajagopal

"CEOs are making X times employees everywhere" -- This is not the problem.
"CEOs of corporations that make billions of dollars in profit after tax are making X times employees when real wages of employees are pathetic" -- this is the problem.

Do you see the difference ?

These two lines of yours conveys a lot more than my (3 pages of writing + graphs) !

This thread should fit in the Understanding Economics thread because there is no way a discussion is possible on this without some economics and social sciences coming in.

This topic was originally there, but nobody visits that thread.
http://www.team-bhp.com/forum/shifti...ml#post4434642