OVER the last decade, it has been the government policy to provide employment to retired bureaucrats (civil or military) on “contract” on enormous salaries and perks mainly to accommodate individuals with a clout.
Perhaps, it started by handing over the (then) Pakistan Telecommunication Corporation to a private sector individual as the chief executive on a fat salary and perks (including post-retirement benefits of using PTCL lines for unlimited calls). The gentleman retired without bringing any positive change.
Our leaders have been quoting instances from India on various facets of the economy whenever it suits them. This scribe has also to quote an instance. Mr E. Seedharat, a 74-year old career railway engineer, was re-employed and assigned the job of finishing work on Delhi Metro. His last salary was Rs38,000. Can Pakistan follow that example while providing employment to retired officials?
In early 1997, “professional” management was inducted in the banking sector with appointments of presidents of National Bank of Pakistan [NBP], Habib Bank Ltd.[HBL] and United Bank Ltd.[UBL] by picking up personnel from the private sector banks.
One of the main objectives was to recover the non-performing loans from influential defaulters and to grill politicised employees unions. There was hardly any success in recovering defaulted loans as they almost stay at the previous level. If there was any reduction at all, it was because of heavy write-offs and technical manipulation.
The write-offs between 1997-2006 total over Rs111 billion as per the annual reports of four banks i.e. NBP, HBL,UBL and MCB]. The success in curtailing influence of labour unions was however achieved. In the meantime, two large banks HBL and UBL were sold to the foreign buyers.
Over the decade, the banking sector emerged among the best pay-masters and emoluments of its presidents and executives have very few parallels in the economy. Normally, the newly recruited young entrants get salaries of nearly one hundred thousand which was unthinkable only few years ago.
The salaries may be justified if they meet the criteria of the social justice and equity that requires that the difference in emoluments of the highest and the lowest paid employees be brought to minimum. In 1970s, the government realised the importance of the matter and did move in this direction.
Over 80 per cent of the banking sector is in the private hands and the principle of equity and justice is not being observed and the regulators have not provided any guidelines in this regard. The Table “A” shows the salary structure of presidents and executives of some banks i.e. NBP, HBL, UBL, MCB Bank Ltd (MCB),Allied Bank Ltd.(ABL) and Faysal Bank Ltd (Faysal).
For space constraints, only six banks which hold about 60 per cent (or over) shares in the banking business, have been cited..
Table A shows that presidents of banks draw millions of rupees annually. Other perks are like membership of high priced clubs. An interesting feature of UBL president’s salary is that it was more than doubled in 2006 and he also draws over Rs1 million annually on account of children’s education.
The table shows a big gap between emoluments of a president and other executives (assistant vice- presidents and above] which range between five to 16 times. Nevertheless, average annual emoluments of executives are around Rs0.2 million per month. Emoluments of higher cadre executives may be much higher and may be half a million rupees or more per month.
The president and executives of the Faysal Bank top the list in the respect of emoluments where president/executives, on an average, draw double (or more) the emoluments of presidents/executives in other banks, (with the exception of UBL president)
The Table `B’ shows the salary structure of employees below the executive cadre of the same six banks:
Table “B” shows that the employees [below executives] in the Faysal Bank are being paid much less than other banks. However, on average, these employees get Rs30,000-50,000 per month.
Is it not surprising that presidents/executives of banks draw millions of rupees annually while the salary structure of the menial staff such as clerks, messengers and drivers etc.- who after serving for 10-15 years have reached Rs 10,000-12,000 per month level (though again much above the market rates)?
The presidents/executives in HBL/MCB have thrown thousands of such employees out of job and have filled up the gap by getting individuals through private companies at Rs3000-4000 per month. How these management cadres determine their own “market price” is also an enigma.
Over 90 per cent of bank business is centralised. However, State Bank of Pakistan [SBP] has permitted these banks to hold the meetings of their boards of directors outside the country as per the following criterion:
Banks having more than 51 per cent foreign shareholding: four meetings.
Banks having more than 40 per cent but less than 51 per cent foreign shareholding: three meetings.
Banks having more than 30 per cent but less than 41 per cent foreign shareholding: one meeting.
What is the rationale behind holding board meetings outside Pakistan? Is it for providing the top bank executives an opportunity of holidaying abroad at a bank’s expense?
While these large banks have funds for such avoidable expenses, they do not have the funds to equitably compensate depositors on whose funds they flourish. SBP is also helpless before the cartels of these banks while it is always eager to accommodate the wishes of the top echelon of the banks.
Does any authority exist which could regulate salaries/perks structures in the banking industry with a view to remove inequitable vertical/ horizontal distortions?