Economy, Business And Markets
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Restrictions on CEO Salaries, Loans

Restrictions on  CEO Salaries, Loans Restrictions on  CEO Salaries, Loans

As per a directive issued by the Economy Minister Ali Tayyebnia, a cap has been devised for the income of bank CEOs and they can no more have access to interest-free loans as they did before.

As reported by bankemardom.com, no bank executive can receive a salary higher than 195 million rials ($6,347). What's more, according to Act 84 of the government's financial regulations, "CEOs and board members of state and private companies, who in any way are affiliated with the government, cannot earn a gross income higher than 10 times their minimum wage."

The directive comes on the heels of reports that four bank CEOs were sacked as part of government crackdown on undeserving astronomical salaries. Tayyebnia replaced the heads of Mehr Iran, Mellat, Refah and Saderat banks under instructions from President Hassan Rouhani.

Announcing that by law, the top-tier executives of a number of banks and other institutions cannot henceforth be eligible to certain loans, the minister of economy elaborated: "In the past, the loans they received were interest-free and there was no cap on them, which in turn led to irregular payments. The government has now issued this decree to eradicate interest-free loans for executives in the banking sector and state companies."

Bank Sepah, Industry and Mine Bank, Bank Keshavarzi, Bank Maskan, Export Development Bank of Iran, Refah Bank, Tose'e Ta'avon Bank, Post Bank and also Central Insurance company of Iran are among the institutions obliged to follow the new rules.

The salary scandal went viral two months ago when the amount of inflated payments to top officials at state-owned banks and companies surfaced online. It was revealed that many of the senior managers were earning dozens of times more than the average employee. They were also receiving unusually large bonuses, interest-free loans and, in some cases, tax breaks.

Curbs on Lending

Tayyebnia said a committee has been formed, responsible for imposing a wage cap and the interest rates on the loans. Expressing hope that the said committee will convene next week for the lawful lending to resume. "Those applying for the loans should be working for their institutions for a number of years, meaning that a CEO will not be eligible soon after appointment."

It was announced that the new rules will also include all those working for the government establishments – not just the CEOs. But in his comments Tayyebnia said "the restrictions we set pertain only to the top executives and not the loans nor the benefits of ordinary workers .We do not believe in imposing restrictions on regular workers." The new set of restrictions apply only to the irregular payments and loans made to senior executives, he said.

Ezzatollah Yousefian Molla, a member of the Central Council of the Majlis Principlist faction in a talk with ICANA said that a new bill designed to curb astronomical salaries is being drafted by experts to be sent to Majlis at the weekend.

Noting that the legislature will use its supervisory arm to follow up on the matter until it is fully resolved, he added: "The payment of (unacceptably) high salaries has taken place outside the confines of law and loopholes in the regulations that led to such payments must be rectified."

Salaries need to be based on merit and efficiency, the MPs said. "If the salaries are paid based on efficiency, there won't be such huge differences" between what the top managers earn and what employees take home.

Financialtribune.com