Domestic Economy

A Different Look at “Inflated Salaries”

A Different Look at  “Inflated Salaries” A Different Look at  “Inflated Salaries”

President Hassan Rouhani recently announced new regulations about the salaries of top officials and executives.

As per his directive, all state organizations are obliged to disclose the salaries of their CEOs and managers.

The president also called for swift measures to improve current regulations on openness and transparency in state bodies.

The announcement on July 5 was meant to allay the widespread public concerns over a salary scandal. It broke when the paychecks of top managers at banks and other companies were leaked on the social media, showing their salaries to be dozens of times the average monthly income of an urban household, which has been described by the local media as being “astronomical”.

Professor Alinaqi Mashayekhi, the founder of Management and Economy Department of Sharif University, has looked at this issue from a different perspective.  

Excerpts of his opinion piece, published in Tehran Chamber of Commerce, Industries, Mines and Agriculture’s website, are presented below:

The case of executive pay has turned into a highly contentious issue in recent days. Therefore, it seems vital to review the issue from above the political fray and from different perspectives.

1. The point that stands out in the leaked pay slips was not the monthly payments of top officials, but the sign of political partiality. At times the annual payment of an official plus his bonuses are advertised as being his monthly salary. Such political cynicism and media hype would get in the way of transparency and give rise to destructive sociopolitical excitements.  

2. Strong executives are assets of the country. The administration of affairs needs such national assets. To boost investment and create jobs, we need efficient managers. The country needs qualified decision-makers who know how to manage investments as much as it is desperate for investors. Management is a crucial productivity factor; slandering the executives would dent production and productivity really hard.

3. More than 80% of Iranian companies are run by the government. All major producer companies, banks, insurance bodies, holdings, pension funds, major airlines, ports, shipping and railroad companies belong to the government; their directors are picked by the government, directly or indirectly. Their assets are public assets.

If management over 80% of the country’s assets turn out to be unskilled and politicized, as it was the case in the past decades, productivity of 80% of the society would decrease. Interestingly, fingers were pointed at the managers of these same organizations. What if the efficient directors of such major entities turn their backs on state organizations as a result of such a smear campaign?

4. It is no doubt that the salaries of CEOs should be set based on their performance and responsibility. Meanwhile, the media and public opinion should shift their focus on directors’ conduct and qualities. It is worth noting that the CEOs of major corporations in the world are all expensive and receive fat paychecks. For instance, I believe a skillful manager at the helm of the Civil Servants Pension Organization or Social Security Organization or Social Security Investment Company is entitled to have a six-figure income [in US dollars].

Efficiency and productivity are what society needs to demand from executives, particularly those in state-run organizations. The income received by the directors of leading private companies, which are usually much smaller than public organizations, could be a good criterion to set the salaries of the CEOs of governmental offices.

The establishment cannot have skillful directors by paying a fraction of what private-owned companies pay to their top managers. This seems more important when we recall that these CEOs are constantly kept under the close watch of intelligence and oversight organizations.

5. It is important to note that executives who choose to work for the government, like presidents, ministers, directors and parliamentarians, receive far less income than the executives of economic organizations in lieu of higher social prestige. The salaries of these two groups should not be compared.

Skillful managers of companies need to enjoy outstanding qualities required by national and international markets and stand accountable for their performance. On the other hand, those who serve as judges or directors of tax offices need to be ethical, trustworthy people who happen to live quite decent lives.

Finally, it is strange that the government showed a kneejerk reaction toward the release of a couple of paychecks. It was best if they had announced the exact figures of the salaries after conducting a comprehensive investigation.

The government’s hasty reaction fanned the flames of negative feelings toward top managers. Efficient CEOs are assets of the country, which would be squandered by the negative campaign mounted against them.