Executive salaries – especially at the top are justified, because they are competitively determined by market forces!

If you believe that all salaries are market determined, it is not true. Not true at all. Many people get protected because companies want to say ’44 MBAs have stayed with us for the past 12 years’ – typically called the Dog and Pony show.

At board meetings and VC funding meetings it is necessary to show some longevity…so it helps

Some people move in a group – they take their ‘friends’ along and pay them different from the market. Of course when the ‘main person’ falls – all the others fall, but in the 10-20 year run that some careers run, the salaries are much greater than deserved.

To the manor born! – those kids whose parents can place them in high places (or even low places but high salaries) will make an attempt to do that. Such kids just have to go and get a ‘qualifying’ degree (once upon a time it was a Bcom, now it is an MBA) and that ensures that they get a good job..and a high salary and life is great.

Branded jobs vs. unbranded jobs: Those people who are able to break into highly paid jobs in companies with less stress get the ultimate combination – a few public sector owned (but called private sector) banks, national stock exchange, recently SEBI,….are such examples. Once you are there and are not very ambitious….life is a good work- home balance.

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  1. Rt u r..
    This is true not only for higher ups but at all positions.
    Say toady with 6th pay commission once ur in central govt job life is fun all the way.
    No relation to performance.

  2. Well said Subra. There is another category where the executive pay gets higher. The bosses pay higher to their subordinates to justify their own salaries.

  3. agree Amit. Recently spoke to the MD of a fin ser co…and said why not cut ALL salaries by 30% instead of removing so many people at the bottom…he said “it is nice to stand in front of the board and say…x no. of people were removed for non performance” – much easier to sell 🙂 …what can one say? GRin and bear it..

  4. I am sorry i dont quite understand how this is a myth. If you mean to say MBAs get paid better and companies willingly pay more to those with MBAs than others, isn’t that market at work.

    Ofcourse govt jobs and employees arent paid by market and their salaries are determined arbitrarily by so called experts.

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