May 25, 2007

CEOs salary cannot be legislated

Sunil Mittal, in a reply to the PM, stated that "CEOs salary cannot be legislated" (read here). I buy his view and argument. I'm a bit surprised why an eminent economist like Manmohan Singh chose to conveniently forget the demand supply theory. More the demand for a resource, more the bucks one has to pay to get it. This becomes more significant if the resource is human. It is money that differentiates between a good resource and a mediocre resource. Normalizing the pay structure will take out that differentiator. If the differentiator is not there, the motivation will be less. After all, most of the people do not work for charity! They work for money! That gets the best out of them. We, as a nation, have to try to get the best out of the people; not the mediocre out of them.

Regarding inflation, yes government has to control it. And it has to do it through policies and not through micro management. Find innovative policies and set it right. To do that, to be innovative, the government has to bring the best out of it. The question is: Does the government have ‘good resources’ that can achieve this? Can the government get the best out of itself?

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