Lately, a lot is being written about fat pay-cheques of CXO’s. Some corners have been suggesting ‘moderation’ in salaries, while some have been suggesting ‘austerity in conduct’, while some have even called such figures as astronomically obscene!
Let me ask, why? What’s wrong with such so called fat-cheques?
But as they say, let’s begin at the very beginning…
Let’s start with the word ‘Profit’. What are profits? Marx claimed that profits were surplus value that should be removed from the economic system. I disagree. Instead, shouldn’t we view profits in the same light as we see prices, just like wages, rents and interest? Profits are actually the ‘price’ we pay to the entrepreneurs for taking risks and developing products and services for us. Isn’t it unfair to expect the entrepreneurs to provide this service for free, since these costs are necessary in any viable economic arrangement? If it’s fair, then shouldn’t they be paid a price for it?
Let me tell you a story here -
A man decided to have his portrait sketched by a sidewalk artist.
He received a very fine sketch, for which he was charged Rs. 10,000/-.
"That's expensive," the man said to the artist, "but I'll pay it,
because it is a great sketch. But, really, it took you only ten
minutes."
"Twenty years and ten minutes," the artist said.
But, as the story of the artist above illustrates - sometimes it's not obvious what we are paying for. Does one pay for the act or does one pay for the experience? If the experience is his (i.e. the artist’s), but the act was for you, then shouldn’t one pay only for the act? But again, wasn’t the act so accomplished, thanks to the experience? This is not a case of Catch 22; it is very clearly a justification of the price the artist has asked for.
The case is no different for CXO’s. On behalf of the people who have set up such large corporations (i.e. the entrepreneurs), it is these CXO’s who risk their experience and reputations and so earn huge remunerations. So what’s the harm in their earning fat salaries? The risks they take are equally big and fat!
In a capitalist society, this is absolutely justified and people suggesting austerities need to look at their own backyards.
Let me ask, why? What’s wrong with such so called fat-cheques?
But as they say, let’s begin at the very beginning…
Let’s start with the word ‘Profit’. What are profits? Marx claimed that profits were surplus value that should be removed from the economic system. I disagree. Instead, shouldn’t we view profits in the same light as we see prices, just like wages, rents and interest? Profits are actually the ‘price’ we pay to the entrepreneurs for taking risks and developing products and services for us. Isn’t it unfair to expect the entrepreneurs to provide this service for free, since these costs are necessary in any viable economic arrangement? If it’s fair, then shouldn’t they be paid a price for it?
Let me tell you a story here -
A man decided to have his portrait sketched by a sidewalk artist.
He received a very fine sketch, for which he was charged Rs. 10,000/-.
"That's expensive," the man said to the artist, "but I'll pay it,
because it is a great sketch. But, really, it took you only ten
minutes."
"Twenty years and ten minutes," the artist said.
But, as the story of the artist above illustrates - sometimes it's not obvious what we are paying for. Does one pay for the act or does one pay for the experience? If the experience is his (i.e. the artist’s), but the act was for you, then shouldn’t one pay only for the act? But again, wasn’t the act so accomplished, thanks to the experience? This is not a case of Catch 22; it is very clearly a justification of the price the artist has asked for.
The case is no different for CXO’s. On behalf of the people who have set up such large corporations (i.e. the entrepreneurs), it is these CXO’s who risk their experience and reputations and so earn huge remunerations. So what’s the harm in their earning fat salaries? The risks they take are equally big and fat!
In a capitalist society, this is absolutely justified and people suggesting austerities need to look at their own backyards.
No comments:
Post a Comment