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Do we need CEOs like these? - Views on News from Equitymaster
 
 
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  • Jun 2, 2009

    Do we need CEOs like these?

    Indian CEOs cheer as employees lose morale
    Bernie Madoff may have gotten a big rap on his knuckles for running a Ponzi scheme but quite a lot of CEOs in India are doing the same and that too right under the nose of the authorities and are walking away scot free. We are referring to the healthy dose of increments in salaries that the corporate chiefs are helping themselves to even as their firms report lower profits or are mired in losses.

    As per The Economic Times, a survey of companies that have come out with their annual reports has revealed that four out of every five CEOs covered by the survey have gotten a pay hike even as half the companies covered reported lower profits or made losses in the latest fiscal over the previous year. And leading the list is Ranbaxy, a company that has made a habit of hogging the limelight for all the wrong reasons. Despite profits of Rs 7.7 bn in 2007 swinging into a loss of Rs 9.5 bn in 2008 at India's largest pharma company, its erstwhile CEO witnessed his total remuneration go up from Rs 196 m to Rs 237 m (or around Rs 197 lac per month!). Compare this with the paltry Rs 9 m of remuneration that Nandan Nilekani, the co-Chairman of Infosys earned in FY09.

    Many such incidences will come to light when more companies come out with their annual reports. We wonder what kind of morale employees at these companies would be carrying, especially at a time when they themselves face huge salary cuts and see some of their peers being handed the pink slips.

    US' deficit to fall to 3% of GDP
    Even as China is worried about the safety of its investments in US Treasuries, the US Treasury Secretary Timothy Geithner is looking to calm the dragon nation by stressing that the US intends to shrink its budget gap as soon as an economic recovery takes hold.

    As reported on Bloomberg, Geithner is aiming at bringing down the deficit to 3% of GDP from a projected 12.9% this year. For the fiscal year ending September 30, the US deficit is projected to reach a record US$ 1.75 trillion from last year's deficit of US$ 455 bn. Meanwhile, as of March, China held about US$ 768 bn of US Treasury bills. Geithner's target is an ambitious one indeed and the road to achieve this only going to get rougher. The bailouts and planned tax cuts will have to be phased out plus expenses will have to be severely curtailed if the US has to achieve Geithner's target.

    Also, while there have been glimmers of a possible recovery which has had a positive impact on the stockmarkets, the fact remains that given the scale of the crisis, recovery will be a slow and gradual process. Thus, the US may be able to bring its deficit down to 3% GDP. But that is not likely to happen for some time to come. And if printing more money to fund the bailouts will lead to higher inflation going forward, the US dollar is sure to lose sheen In that matter, probably the Chinese do have something to worry about.

     

     

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