The hypothetical example used in this article (CLICK HERE) to demonstrate the negative impact of a cap on CEO salary is just that- a hypothetical scenario! The various numbers and strong assumptions made could (but not necessarily) lead to the outcome presented; however, to suggest that this action will create “bloated financial institutions with the management’s mandate to seek total asset growth irrespective of other factors” is ludicrous!
The fallacy of the argument lies in the direction of the causality. It is the NRB’s action that is the effect here not the other way around. Also, if a management is looking for a short term salary benefit then they need to increase and sustain the average salary of their employees as well, because the NRB’s rules suggests “the BFIs to limit the fixed annual salary and allowances for chief executives to less than 5 percent of the average staff expenses incurred over the previous three fiscal years or less than 0.025 percent of the company´s total assets at the end of the previous fiscal year, whichever is lower." (CLICK HERE) If true this will be financially difficult and possibly a long-term suicide.
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