High salaries of MFI bosses raise eyebrows

“In general, when you are dealing with the poor, it does not appear morally right to take high compensation given that the income is coming exclusively from the poor,” says MS Sriram, adjunct professor at the Indian Institute of Management, Ahmedabad. Sriram documented such promoter-friendly payouts in his March 2010 paper titled ‘Commercialisation of Microfinance in India: A Discussion on the Emperor’s Apparel’.   After the collapse of Lehman Brothers in 2008, banking regulators across the world are taking greater interest in the compensation of executives in the financial sector. In India, the Reserve Bank of India (RBI) vets the salaries of bank CEOs and has even intervened in the odd case.    However, the central bank has so far not intervened in the case of microfinance institutions. The RBI-appointed Y.H.Malegam committee, which last month gave recommendations on the way forward for the distressed microfinance sector, was silent on the issue of managerial compensation. It did, though, talk of microfinance companies developing corporate governance norms that limit variable compensation for employees.