Only 38 people out of more than 158,000 professionals that the country’s banking sector employed in 2012 held the title of CEO/president. PHOTO: FILE
KARACHI:
Can a line be drawn between ‘highly paid’ and ‘overpaid’ when it comes to executive compensation?
In the case of top bankers, who are known worldwide for their insanely inflated salaries, how exactly should the monetary value of a CEO be determined?
In an ideal marketplace, the law of supply and demand would seal the remuneration debate once and for all. But according to many, things are so skewed at the top of the banking industry that the issue of executive remuneration cannot be left to the market forces alone.
Speaking to The Expres Tribune, Research Institute of Islamic Banking and Finance Chairman Dr Shahid Hasan Siddiqui said banks exploit depositors in Pakistan by operating like a cartel. “Their combined pre-tax profit in 2001 was roughly Rs1.1 billion, which rose to about Rs185 billion in 2012. But without sharing profits with depositors, their boards of directors have rewarded top managements unjustifiably and increased executive remuneration completely out of proportion,” Siddiqui said.
To prove his point, he cites the example of a foreign bank’s CEO whose take-home salary is more than Rs10 million a month.
According to banks’ annual financial reports for 2012 – the latest year for which detailed data is available – the CEO of Standard Chartered Bank had the highest annual remuneration in the country amounting to Rs143.5 million, up 34.7% from the preceding year when it totalled Rs106.4 million.
The annual remuneration of the Meezan Bank CEO was Rs99.7 million and that of the United Bank CEO was Rs97.9 million in 2012, making them the country’s second and third highest paid banking executives.
The remuneration of MCB Bank – which is the largest Pakistani bank in terms of market capitalisation – in 2012 totalled Rs83.1 million, up a massive 93.7% from 2011 when it equalled Rs42.9 million.
The CEO of Bank Alfalah received a major cut in his pay cheque in 2012. His annual remuneration dropped 38.9% to Rs82.1 million from Rs134.6 million in 2011. Yet, he was the fifth highest paid CEO in the country’s banking industry in 2012.
The highest jump in percentage terms was witnessed in the remuneration of the KASB Bank CEO. His annual remuneration was Rs62 million in 2012, up 203% from the preceding year.
“Banks have been enhancing their profitability only to the benefit of their majority shareholders,” Siddiqui said.
However, citing plain statistics show only one side of the picture, according to professionals serving at the top of Pakistan’s banking industry.
“It’s ridiculous to question why somebody is getting a high salary,” a bank president told The Expres Tribune while requesting that he should not be named. “Bank CEOs sit at the helm of for-profit organisations with assets worth hundreds of millions of rupees. I don’t find it surprising at all that their remuneration is relatively higher than that of their counterparts in other sectors of the economy,” he said.
Noting that only 38 people out of more than 158,000 professionals that the country’s banking sector employed in 2012 held the title of CEO/president, he said shareholders hold executives accountable and can fire them for bad performance.
“We get high salaries because we deserve them. If you pay peanuts, you get monkeys,” he said.
Published in The Expres Tribune, February 17th, 2014.
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COMMENTS (32)
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Everyone should stop blaming the CEOs for fetching so much for themselves . No one would say no to more money. I won't either. Nor would any of the posters attacking the highly paid CEOs.
That is precisely what the system wants the sheeple to believe.....
The real cost of paying truck loads of money to a cartel of self imposed bank czars costs the average man , country and economy......this 'someone else's salary' is passed on the average man and cost is passed on and on... ......ever wondered why the banks who usually want to reduce the cost of everything never seems to find cheaper executives; ever wondered why you have to pay for checque books, debit cards and statements ( while that was free when I was growing up) .......how come the the profit on your saving account is below inflation........and how come the perks of these bank czars even include medical for their dogs!! Their perks and interest free personal loans are story for some other day... ................This is not a victimless crime to .............bleed the economy by being a critical tool in printing money and spreding it out in the economy ; it makes yours and my labor ( work hours) cheaper..........
Clearly the common man does not even know how we are being scammed ........
another one of the sensational scoops doing rounds on the net! not much different from the muhallay ki khabar rakhne waali!lets stop focusing on how much other earn and work more towards making ownself a stronger and useful individual.
@Carl Marx: You cannot just pretend that doctors (I presume that you are one) act much differently from this - the specialist rooms are packed with people who pay upwards of Rs 1500 just to spend less than 2 minutes with the specialist, who in many cases, treats his/her patient as a fool not worth a detailed explanation. We are speaking here of salaries, not acts of kindness towards fellow humans. Sure those acts are essential and are part and parcel of humanity. There are some very generous doctors, as there are executives. Your emergency example again misses the point that ER staff provides a vital service that is independent of the plastic surgery services which are provided in a different setting. Both are needed and hence both are offered. The private hospital system exists precisely for the purpose of offering services, both emergency and non-emergency, to the well-to-do clients.
I wish you capitalists can say things to this effect on the websites of Business Schools which are the nurseries for such anti-social mentality.
I just sincerely hope that free market evangelists bring their loved ones to Emergency and the doctors/nurses keep on busy with teeth whitening, liposuction ignoring the emergency. And when a 100000% emeregency is charged for attending the loved one . And I just wish they will sayy Hullalulah, praise the Lord for Free Market Economy!
@Uza Syed: it's not about emotionalism but the dynamics of the economic system that's based on free-market and that rewards according to the value added. You can question the system and try to bring a different system, but this is what free-market dictates. Sure there are people who don't deserve it and they slip through the system and vice versa, but overall, those whose contribution is of high value will get reward commensurate to their contribution. Yes, fier-fighting and teaching are essential duties that society cannot live without. Take the extreme case of their being only one police officer or one teacher in the world, in this hypothetical scenario, he/she will command astronomical salaries. You can very easily envision such a professional earning tens of millions. I hope that clarifies a bit more.
@Jahanzaib Khanz: Well Sir, it is only after squeezing the ordinary people like us, they manage to get these fat salaries.
@Carl Marx: Excellent! ----- Thank you for highlighting the importance of those in any society who "really provide substantive, real value added service to a society" folks like nurses, teachers, firefighters and the police. Hopefully, the readers here have benefited from your these valuable comments and realize the importance of many here who really give all what they can for the "peanuts" that we give them for salaries.
@Ch. Allah Daad: it's not about being private vs non private. CEOs don't bring in the money so your statement was not valid. That's all I was correcting
Banking CEO's are paid high the world over - it's unimaginable for a layman to understand the tremendous skill and responsibility that the holder of this position has. If the CEO salary was so outrageous, the whole world would not be accepting this fact. Only the absolute cream of the crop reach the top of the organizational ladder.
@ok: As far as we know, these are private organizations with sole purpose to earn profits. How they do it is their business. Government can impose minimum wage restrictions and higher taxes on higher incomes, but capping salaries and perks is left to private organizations, their owners and management.
in my opinion there are certain sectors where people are paid higher salaries compared to others across the globe and banking is one of them. The real question should be how much tax they are paying?
You cannot compare yourself with CEO's even you don’t know there journey to reach in this position all about. I’m the regional head one of the bank in UAE. i can understand cos I’m on this track.
@Nida Alvi: Yes, interesting conclusion (but not original!), “If you pay peanuts, you get monkeys,” . One would have expected the Bank President to be honest enough and mentioned the former president of Singapore, Lee Kuan Yew, who is honored with recognition such as being The Founder of Modern Singapore. What your banker president forgot to say or avoided saying is the fact that this holds for everyone in an organization. Only stupid people will work for you if you do not pay very much and only highly inflationary salaries of the guys at the top alone won't achieve much as far as productivity and profitability are concerned.
Elite goes richer and Middle class goes poor. It is dilemma of our country. All banking sectors are minting money there is no difference between conventional and Islamic bank the only difference is name difference.
If an employee earns 100 million in profits every month, I will happily give him 10 million a month. Its called common sense.
Bankers working in operations department are getting peanuts in return for their hardwork, who even do not get enough time to take lunch and offer prayers during duty times.They are not monkeys then.In fact, they are the hardworkers who need to be well paid
Law says the difference between the highest paid and lowest paid employee in a company cannot be more than 100 times. If CEO is getting 1 crore a month, then the security guard or the office boy should be paid 1 lac a month. Only then you can justify such huge pays.
Few employees of upper management get the lion’s share and many of lower layer just get the leftover. This is a kind of white color crime that has been legalized. Further by putting the remuneration of these executives parallel to the economic condition of our country these banks don’t seem Pakistani.
If I had a safe viable option...........I would NEVER keep money in a bank.
Is there any comparison of executive compensation paid by Multinational Companies (MNCs) and the media houses? Some of the TV anchors are drawing salaries in Millions per month alongwith paid visits for interviews/holidays abroad. What is the compensation to cricketers, who scuffle with police after violating the law? The second most important aspect is Taxes. The salaries of employees are taxed at source. But the media persons & celebrity cricketers don't even pay taxes on "fee" http://www.awaztoday.com/NewsFBR-to-send-tax-notices-to-TV-anchors-showbiz-celebrities124081Political-News.aspx The article's conclusion is very interesting "If you pay peanuts, you get monkeys”
Supposedly the brightest, most talented and the highest paid bankers in the world work in Wall Street. Yet it was these very same people who brought the world economy to its knees in 2007, risking a depression on the scale of the 1930s. It would therefore seem that if you paid millions to bankers (instead of peanuts) you might end with the biggest and most stupid collection of monkeys ever seen.
I am a supplier to many banks for many daily use items. I am really shocked to hear of these salaries because when the procurement departments negotiate with us, they keep telling us the banks are doing so badly. Ok so that is a negotiation tactic and I understand it. This is fine. But what's apalling is that after squeezing me, they will go to a competitor who provides items cheaper by compromising on quality.
If the CEO just gave up 5% of his annual remuneration, you would see vast improvements in the quality of the products and maintenance that the banks will get it.
You will always get people who will justify the need for more money - this is call greed!.
By overpaying themselves i.e. the PRESIDENTS, not much is left to distribute to the lower level employees and obviously the bank is only left with enough to hire 'donkeys' to deal with the customers. At the same time it becomes easier for the Presidents to justify to the board that since they are managing a huge number of donkeys they should be the horses and paid more!
Obviously a Islamic banking theory of equitable sharing of profit between the employee and customer will remain a theory. As Yogi Berra once said, " In theory there is no difference between theory and practice; in practice there is."
the banks in Pakistan are operating like a well organized mafia and because of the permanent government of corruption in this country they will keep thriving at people's money
When i will become CEO of any bank of Pakistan????
Frankly I could never understand stratospheric bank CEO salaries globally. They are not "producing" anything - nor delivering anything critical. They are just locking up other people's money and lending that out, paying and collecting interest respectively. I'd say their challenge is far lower than a CEO who say - produces cars, yet the bank CEO's salary will be way higher!