Letters: Paying for performance

The report “UK to have say in executives’ pay” (January 7) reminded me of the formation of the Cadbury Committee on corporate governance in the UK. In the eighties, financial scams were rife in the UK (Robert Maxwell and the Mirror Group, Asil Nadir and Polly Peck, Bank of Credit and Commerce International), and the excessive pay that executive directors gave themselves was one among them. The Cadbury committee recommended that non-executive directors should be involved in fixing these pay packets, which should be commensurate with the responsibility and the performance of these directors. These recommendations were followed up by the Greenbury Committee, all of which brought back some semblance of discipline to executive pay packets there. In India we are now experiencing such disproportionate pay packets after the economy was liberalised in the early nineties. But the improvement in corporate results over the licence raj years was the result of liberalisation rather than the performance of executives who ran these companies. So they are reaping a grossly disproportionate harvest. In this connection I would like to quote what J R D Tata said in the seventies in a meeting with MBA students in XLRI, Jamshedpur at which I was present as faculty member. Asked by a student what he thought the ratio of salary between an ordinary worker and the top manager should be, Tata said, “Not more than one is to ten”!

Nirupam Haldar Kolkata

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