The need for austerity in these trying times is understandable, but India Inc cannot ignore the market forces to determine salaries to attract the best talent in this highly competitive world, shows a survey by a leading industry lobby.
The survey among 100 top corporate chief executives conducted by the Associated Chambers of Commerce and Industry of India (Assocham) also showed 60 per cent of the respondents maintaining that the best talent can only be attracted if salaries were not regulated.
"Assocham favours the adoption of austerity measures by corporate sector at the current time of crisis. But India Inc cannot ignore market forces to determine the salaries of corporate honchos to enable them attract the best of talent," it said.
The chamber was reacting to a statement over the weekend by Corporate Affairs Minister Salman Khurshid who said heads of Indian companies needed to practise austerity and forgo huge salary packages.
Assocham said 60 percent of respondents were of the feeling that the biggest challenge India faced today was becoming a super economic power, which could only be possible by recording a higher economic growth.
"Essential ingredients for it would be employment of the best talent in corporate world whose salary package have to match the prevailing best in all parts across the globe," said the chamber on the basis of its survey.
According to Assocham, 40 percent of chief executives at the same time believed corporate heads must also avoid ostentation and make "judicious and prudent" utilisation of available resources to fuel growth and create employment opportunities.
The survey was conducted among chief executive across industry segments, including those in real estate, consumer durables, steel, cement, mining, and banking and financial sectors, the chamber said.
The debate on high salaries was originally started by Prime Minister Manmohan Singh who said India Inc must resist excessive remuneration to promoters and senior executives and discourage conspicuous consumption.
"Profit maximisation should be within the bounds of decency and greed," he said while addressing a large gathering of corporate executives and industrialists at an event organised by the Confederation of Indian Industry (CII) here in 2007.
Subsequently, a survey on corporate governance in India conducted last year by leading global consultancy KPMG had also found that 85 percent of the respondents wanted the remuneration of chief executives linked to company performance.
The report, titled "The State of Corporate Governance in India: 2008", said linking salaries to performance will improve corporate governance.
The CII, which has set up a task force under former cabinet secretary Naresh Chandra on the larger issue of corporate governance and the responsibility of companies towards the society, says the prime minister's agenda set in 2007 should be the guiding principle.
The chamber has been maintaining that its members were willing to accept the code of conduct as recommended by the soon-to-be-released report of the Naresh Chandra Committee, which may also recommend another panel to look into corporate remunerations.
"The Confederation of Indian Industry has always believed corporates have a social responsibility and always supported self-regulation," said chamber president Venu Srinivasan.
The CII president also claimed that the chamber had a code on corporate governance in 1998 -- much before the markets watchdog Securities and Exchange Board of India (SEBI) spelt out its regulations for listed companies.