Economics says;
Factors of Production Reward
1. Land/ Raw Material Rent/Cost
2. Labour Wages
3. Capital Interest
4. Organisation Profit
Of the above reasonable Rent is easy to calculate as a percentage of cost of the building.
But for compounding, reasonable return on capital ‘Interest’ is easy to calculate.
Profit is uncertain and not in any one’s control and can fluctuate from year to year, so except taxing and fixing the maximum recommended retail price, it is difficult to regulate this.
Labour:
It is the most difficult to calculate. Nearly impossible to calculate appropriate wage for a particular job/person in different sets of working environments and organisations.
This is the reason for the minimum wages legislation. This ensures everyone gets appropriate minimum wages.
Likewise, it is difficult to calculate the pay for a Director/CEO or other managerial staff in public limited companies. Hence there should be a legislation for the maximum pay to these.
Particularly in Public limited companies as the is no direct connection between (or there is a big gap between) ‘ownership’ and ‘control’ of such business structures.
People in ‘control’ of these companies can easily exploit all in society.
Particularly for managers, CEOs and Directors in Bank, Insurance companies, Stock exchanges, software industry.
They have tax advantage in taking their pay;
(a) as shares in the company (no tax payable until they are sold)
(b) 'Fringe benefits' including 'expense payment fringe benefit' and 'residual benefit fringe benefit'.
Taking the pay as fringe benefits, they don't have to bother about consumption tax (GST/VAT/Sales tax) as this is paid by the employer. Employer gets refund of this tax in full. Only the employer has to pay 'Fringe benefit tax' to the Tax office and not employees.
They can nominate any payment, their personal credit card payments, home electricity, gas and water bills etc as residual fringe benefits. So these individuals have nothing to lose.
Now
“For Directors / CEOs of public limited
companies, there should be a legislation
on maximum salary”. Do you;