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  • Writer's pictureYB Wong Chen

Yak about pay cap

I am taking a break from office today. I have sprained the muscle (or fat!) on the right side of my torso, so I have decided to lie in and watch some TV series.

I am also taking the opportunity to yak about pay and salary cap.

One of the biggest problem facing the world today is income inequality. The other biggie is of course, global warming.

When I was a high school student some 30 years ago, I took an International Baccalaureate course called Science, Technology and Social Change. STSC was a special IB class designed for students who disliked sciences.

STSC was great fun and introduced appropriate technology and the works of the economist, EF Schumacher. In his book “Small is Beautiful”, Schumacher talked about a Scottish company that imposed a ratio of highest pay to lowest pay employee. That ratio was 7:1, in other words the CEO was paid 7 times more than the lowest employee. Example; if the lowest earning staff was a cleaner making RM1,500 a month, the company CEO pay cannot exceed RM1,500 x 7 = RM10,500.

That was a ratio prescribed more than 30 years ago. If the CEO wants a million ringgit pay, he has to then ensure that the cleaner makes RM140,000 a year!

The purpose of the ratio is to enable a sense of fairness and social mobility. It is only from equal pay can society progress as a whole. It is only from fair pay, can the poor start to accumulate savings for retirement and pass on a bit of asset to the next generation.

Nowadays, we can’t even talk about a 7:1 ratio without being branded a communist. What do you think the ratio should be? I will venture to say 20:1 is more do-able. Let me have your views.


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