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Singapore, here we come!
Comparisons of national GDPs with respective salaries of heads of state reveals some interesting facts
Much is being discussed and debated on the issue of who gets to decide on the CEOs’ remuneration in a listed company. This is true especially in US, where shareholders felt cheated by the recession and excesses by CEOs; both in terms of pay and in the way they took excessive risks to take their companies, and shareholder wealth, to newer lows. So if it’s all about taking accountability to the highest level, it does make sense to look at remunerations of the ultimate CEOs – the heads of state. After all, their role is far greater than any of the corporate leaders.
Voters in a democracy don’t exactly have a say on what their head of state gets, in fact, many of them may not have even seriously considered that an issue. But then, is there a pay to performance link at work? We decided to check for a correlation between remunerations of some heads of state with GDP performance of their respective nations; and came up with some interesting revelations.
To start off, the US shows greater parity. The concept of compensating the President took shape during 1790s in the US. In as early as 1789, the basic salary of the US President was $25,000 annually, the value of which in 2009 dollars is $566,000 when the GDP of the country was over International $527 million (the currency being used at that time). Exactly 84 years later, in March 1893, the basic salary of the President was doubled to $50,000, value of which in 2009 dollars is $865,000, while the GDP of the economy grew by 187 times. Salary was again hiked in 1909 to $75,000, the current value of which is an astonishing $1,714,000; even as the US became the second largest economy of the world after the UK, with a GDP of International $517.38 billion. The salary was revised to $100,000 in 1949, even as US became the largest economy of the world with a GDP of about International $1,456 billion. The salary was further raised to $200,000 on Jan 20, 1969; while the size of the economy nearly doubled. And when the basic salary was given its final boost – to $400,000 on Jan 20, 2001, the size of the economy increased to $10.29 trillion. Since then, the economy has not done quite well, with the current GDP at $13.84 trillion, and interestingly, the basic salary of the President has remained the same.
Singapore is quite an aberration though. It pays a whopping $3.14 million (nearly 8 times that of the US President) to its President and $2.47 million to its Prime Minister; while the size of its economy is just $182 billion. Though there are debates over the high salary among Singaporeans, the Government defends it vehemently, on the logic that Singapore compensates its heads of state on the basis of parity with corporate leaders! Perhaps the most striking example would be that of India. The President of democratic republic of India gets a mere Rs.18 lakh annually. The basic salary of the President was a pitiable Rs.120,000 annually prior to 1998 while India emerged as the 6th largest economy in the world with GDP in PPP worth International $1,702.7 billion. This was revised to Rs.6,00,000 ($12,000) in 1998. Later in late 2008, the salary was raised to its current level, while the country witnessed rapid growth and the GDP crossed the trillion dollar mark. That was when India became the 4th largest in terms of GDP in PPP terms and the 12th largest economy in terms of nominal GDP. The PM of India, who is the actual functional head, has an even lower salary of Rs.15,00,000 per year ($31,250).
In UK, the Prime Minister gets about $2,79,000 annually, while its economy is the 6th largest in the world with a nominal GDP of $2.68 trillion. Tiny Hong Kong pays $516,000 (more than the US President and 13 times that of the Indian President!) to its Prime Minister annually, while it has nominal GDP of $215.35 billion, 1/65th of the US economy and 1/5th of the Indian economy. Japan, the 2nd largest economy in the world with a GDP of $4.91 trillion pays $243,000 to its PM annually. Similarly, Australia pays $2,29,000 annually to its PM while it is the 14th largest economy of the world with GDP of $1.013 trillion. In addition, Canada, Germany and France with nominal GDP of $1.499 trillion, $3.673 trillion and $2.867 trillion respectively pay their PMs $2,46,000; $3,03,000 and $3,18,000.
By:- Akram Hoque
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