There seems to be a strong disconnect between the salaries paid to CEOs by major IT companies in India and the kind of headwinds the industry is currently facing. Do you see this level of variance in other industries or is it unique to the IT sector?
Honestly, this is a very difficult subject. To answer your question of whether this is something we notice in organizations outside of IT, we can of course see it in the data available for the organizations listed. I’m a little worried about this whole debate because I don’t understand what is being proposed? Should we pay CEOs less and start-ups more? There must be a justification for all of this.
So one can have a standalone debate on whether or not the compensation of a particular CEO of a particular organization is justified, but there is a problem with tying it to that of an entry-level salary . Let me explain why. This alludes to the fact that India has a huge employability problem and an entry level skills problem.
For starters in India, not just for IT, but for all positions, entry salaries have barely budged. Interestingly, with experience and more exposure we see how divergence is starting to occur across the board and there is a jump in salaries. Isn’t this data good enough for us to focus on the importance of educating our young people, as I have always maintained that India does not have a jobs problem, but rather a wages problem. Not everyone who needs a job, has a job or is self-employed gets the salary they want.
Rising labor costs have been spotted in almost every quarterly report and this is one of the reasons why the growth of the IT sector has been hit lately. How much of a barrier to growth is the kind of salaries we pay at the top of the IT industry?
Compensation at the highest level is decided by the board of directors as well as by the shareholders, especially if you are a listed company. They watch every move of the organization and if they feel the compensation is warranted for a particular CEO who can give the organization the returns and growth that is envisioned in five to 10 years, they are offered that.
The impact of rising wages is happening because thanks to the pandemic, there has been strong demand and an improved outlook around technology and digitalization around the world, across all sectors. There’s been an exponential expansion in demand and skills that we don’t currently have supply available for, and then there’s also the impact or suspense around recession and inflation.
Everyone is playing for the long haul right now. Yes, there will be an impact on the bottom line, but if you don’t retain that talent and continue to invest in it, you’re essentially putting your future at risk, which no organization would want to do at this point.