THE RECODIFIED Companies Act is with the prime minister awaiting approval so it can be put up in the winter session of parliament. One of the important issues in the recodified act relates to managerial remuneration.

In a country where per capita income is about Rs. 3,700 per annum, more than 35 per cent people live below the poverty line, more than three lakh industrial unit are sick, and there exists both regulated as well as nonregulated patterns of managerial remuneration, to what extent can the government be justified in allowing remuneration without ceiling to be paid to a fraction of manager in the profitable corporate sector?

The present provisions relating to managerial remuneration under the Indian Companies Act as well as the Income Tax Act are not justifiable either on equity or social considerations. The prevailing rates of managerial remuneration are many times the rates of their counterparts in government, semigovernment and nongovernment organisations outside the corporate world. These have distortion effects on the economy in general, are inflationary in nature, widen the inequalities of income and wealth, have negative effects on corporate saving and investment and breed corruption.

There should be ceiling on managerial remuneration under both acts. If the gulf between the remuneration of corporate and noncorporate executives continues at this rate, there may be an increase in social tensions, as employees in the noncorporate sector may resort to strike for increase in their salaries. Higher remuneration paid at the current level also results in reduced corporate tax collection. There is no justification for not having any ceiling just because we wish to woo foreign investors.

A corporate executive with seven to eight year' experience is now being paid what is being paid to directors of management institutes, IITs, vice chancellors of universities, professors, editors, secretaries of government, inspectors general of police, medical superintendents of hospitals , etc with over 30 years' experience. The remuneration structure also has a demoralising effect on honest, sincere and efficient professional in other walks of life. It breeds corruption as it can be used to seek favours from those who are in authority by offering jobs to their kith and kin at excessively high remuneration. Favours may also be sought from some of those who are about to retire, on an understanding that jobs in corporate sector in the capacity of advisor or nonexecutive chairman may be offered to them after retirement.

The payment of such managerial remuneration is at times justified on the ground of comparative efficiency or nonavailability of staff at less than these rates, or to attract foreign investment. But does that hold good only in the private corporate sector which constitutes a very small portion of the employment market? Or is it that all those who are holding positions in service oriented organizations engaged in satisfying the nation's merit wants are inefficient and only those who are engaged in commercial activities in the profitable corporate unites are efficient? Are we ready to destroy India's social fabric and take decision which would affect more than 98 per cent people of the country just because we want to attract foreign investment?"