Corporates should address disparity

The start of the new year is used by many as a time to look back at the year gone by and see what the takeaway has been. In the corporate world, this is the time when many entities evaluate how the company performed and what was the contribution of each individual; a sort of performance audit which determines the grant of performance-based bonuses and salary increments for the employees. Taking into account the massive inequalities in income and wealth of individuals, which are multiplying every year, I offer some unsolicited recommen-dations to the decision-makers in the private and public sectors. They may find these recommendations awkward because the people who can make a difference happen to be the beneficiaries of the system which perpetuates inequalities. For starters, I will take a cue from the recent interview of an official of the Overseas Investors Chamber of Commerce and Industry (OICCI) in which he advocated a minimum wage of Rs56,000 per month. This minimum wage should be adopted for all kinds of workers not only in the corporate world but across the country.
The annual bonus in the corporate sector should be restricted to a maximum of 30 per cent of the annual salary of the outgoing year for all employees whose annual salary is Rs5 million and above. This should be done instead of the outrageous bonuses given, especially in the banking sector, where published accounts in some cases show performance bonuses to the chief executive exceeding the amount of total annual salary. Bonuses in excess of the above percentage should be considered for persons drawing lesser salaries. The gap in income, and consequently the wealth of employees in the corporate sector, goes up every year because of a flawed and inequitable system whereby annual increments are based mostly on the same percentage increase across the organisation. Therefore, if the decision is to give an overall 10pc annual increase with effect from Jan 1, the top gun in the organisation, who makes, say, Rs100 million per annum, will get an increase of Rs10 million annually; over Rs800,000 per month. On the other hand, a person on a lower rung whose total salary per year is, say, Rs600,000, will have an additional Rs60,000; Rs 5,000 per month.
The disparity caused by just one increment is so massive that it is painful to even try to work it over, say 10 years. That being so, the recommendation is to maintain the overall increment at 10pc, but give no increment for the next year to persons whose annual salary is more than Rs120 million, or Rs10 million per month, only 2pc to those with annual salary Rs75-120 million, and 5pc to those with annual salary ranging Rs50-75 million. Similar slabs can be introduced further down the line, with increments to individuals at the lowest rung going up to 20pc. At each tier, the distribution should be based on merit. This will keep the employees productive and still contain the overall impact of the payroll to within whatever percentage approved by the board of directors. The decision-makers will not address this simple issue because it will affect their own earnings. Though I have a fair idea of the significant contribution made by chief executives and senior managements to profitability, but can they do that without the whole team being on board? Finally, a recommendation related to the vehicles provided to the senior management. There has been a dramatic increase in luxury cars over the last few years, and it is time the corporate sector restricted the facility to 1,800cc vehicles. The recommendations, if followed even in part, will enable the corporate entities to take the moral high ground and raise the bar for the market at large. Similar actions should be taken by all the public-sector organisations. For once, let us try to do something rational where we can.
AHMED KHAN
KARACHI