Is the Concept of Exalted Pay Packet Withering?

I compliment the management and students of IIMs for taking a policy decision not to make public the skyrocketing salaries that are being offered to their students. It has a connotation other than the immediate reason cited by them that the parents of the students, who are getting the heavy pay packets, are subjected to kidnapping threats. First of all, I do not consider the so-called salaries outlandish. They are similar to what is offered to graduates of Harvard Business School and other Grade A US Business Schools. What I consider a more plausible explanation is the view that news laced with plausible exaggeration from the Business Schools and lapped by the journalists to make the news tempting can create heartburning to the unfortunate lots, who are not lucky enough to land up in a job. There are two diametrically opposite scenarios of students of the Ivy schools finding difficulty in deciding what jobs to be taken and at what salary and the other lot, who are struggling to grab a job whatever the salary offered. My take is that in a country like India, where the number of our employed people is increasing day by day, we have to be careful about flaunting such news since it can lead to social backlash.

However, I have some basic questions on how this skyrocketing salary structures are computed. I was told that the pay packets that are offered include tea/coffee that are offered free of cost, cost of office outings, one-time payments like relocation allowances, signing bonuses, incentive plans linked to company performance and individual performance, stock options, and many more. Recently, one newspaper has written a story about the composition of the total salary in a company, which has the habit of flaunting the total offer. Of the total pay packet of a lakh rupee a month, the receivables in hand including statutory payments like Provident Fund and Gratuity work out to little less than Rs.40,000. There are some other schools, which calculate the average salary offered to students by totalling the aggregate offers received divided by the number of students. That would mean that in a B-school if there are 100 students and the total offers to these students are say 150, the average salary is worked out by multiplying money component of 150 offers divided by 100. The amount will not be a realistic one since some students, the so-called brilliant ones, must have bagged at least five offers and obviously he can take up only one. The difference in offers made to the top person and the last one vary considerably. But the flawed computation of the average camouflages such arithmetic.

I sometimes become very curious to know what happens to the person who gets the maximum offer, say a crore rupee per annum, some five years down the line. If he is such a meritorious guy, his salary should have increased at least between four and five times. There should also be an anthology written about him by the newspapers and magazines about the astronomical salary and incentives that he receives. But I hardly get to know about such stories in the newspaper columns. Can our HR consultants and B-schools undertake such studies as to the plight of their alumni a few years after their entry into the job market? That will be revealing since one can immediately construct a correlation that students who are adjudged the best in the campus continue to be doing well, giving some credence to the selection and ranking process. Yet another issue that has to be made public by the B-schools is the age profile and work experience of the students, who are offered astronomical salaries. It is reported that most of the high-bracketed offers are bagged by people with considerable work experience, though there can be exceptions to this rule.

The other aspect that I feel should be properly looked into is the type of job offers being made to the candidates. I have a great faith in our exam systems conducted by IITs and IIMs. I have no doubt that they are intellectually much superior and are cut out for great cerebral works and research, which can lead to path-breaking innovations and discoveries. But such students invariably land up with private equity firms in India or abroad, which are managing the hedge funds internationally. Their jobs are mostly risk analysis and deciding on the portfolios of investments of large pension funds, mutual and hedge funds and how to maximize the profit, through strategic investments, arbitrage, etc. In short, they work at best as an investment banker. Huge salaries that are offered to them keep them tied to the job, since any other jobs will not give them the same salary and perquisites. Only a few come out of the web that they have caught in, the others become a part of the system. We can legitimately wonder whether we are putting to proper use our best brains. Let us not forget that there is a considerable amount spent from the Consolidated Fund of India for the education of these students. That way, to put it mildly, it is also a huge national loss.

These are some thoughts that have occurred to me and I thought that I put these musings in the public domain. Not that these are the original thoughts (There are many such opinions expressed earlier also.) But the unfortunate thing is that nobody seems to be addressing to these issues in an objective manner. I only hope that the decision of the IIMs not to disclose the pay packet is a sort of beginning in this direction that will gather momentum in the coming years. Let us not feed to the unreasonable appetite of our youngsters to make money, but give them the creative freedom to excel in their field. And, money will follow and not in the other way round.