Rewarding the politicians financially for their work

This entry is part [part not set] of 16 in the series 20010505_Issue

T. Kishore, T. Gopal rao

In the current political set up, the politicians view the politics as a tool to make money. The investment in the political process in the form of expenses during the election time is to be taken back (and more) during the 5 year of rule.

The current political set up is double edged sword in which the politician have to act as the selfless service person to the people, but at the same time he has to run the politics with money. And for political expenses, he needs to get money from the industrialists and people who have legitimate approval from the govt. to start and run business. So it is a no win situation for a real selfless person to come to politics. So, most of the time, the good persons never join politics, and even if they join, either they get corrupted by the process, or leave the political system in agony.

Also there is a talk of corporatization of the govt. It is fancy to talk about running the govt. as a corporate body. What is implied is that if the govt. is run as a company, then there will be less damage, more efficient ways to speedier development. But I am yet to see a way in which the politicians who act as the corporate body members (or directors) of the TamilNadu, Inc, will be rewarded financially for their hard work in streamlining the govt. and introducing efficiency in the govt. works. If there is no financial reward for a politician like a company director would get financial reward for the good work done by him, what will motivate a politician to do hard work for the govt. ?

Are we suckers to assume that all the MLAs and MPs are in the politics for self less service to the citizens ? If not, how it is possible that we think that the Chief ministers, ministers and MLAs should do great job for the measly sum of 2000 rupees per month ?

There should be a direct link between the money that a Chief minister, Minister or MLA gets to the work he does for the citizens, just like a company CEO gets rewarded financially if the company is bringing better revenues for the shareholders. Similarly the Chief minister and the MLAs and MPs should also be rewarded for their work bringing increased income for the citizens.

This article is an attempt to create such a system. By no means this article assumes that this is the end of debate . This should be a continuing process of finding the best way to compensate legally the elected representatives to be rewarded for the good work and be punished for the bad works.

Approach 1.

Create a TamilNadu Performance index (TNPIX) based on various listed companies that have major business interest or have factories in TamilNadu. Float this index in Nasdaq at Banglaore. (The reason for listing in Nasdaq is that Nasdaq is no so amenable to manipulation as BSE or NSE).

Provide options to the chief minister, ministers, MLAs and MPs of TamilNadu just like the options are given to the directors and workers of a company. At the end of the tenure, the MLAs or MPs can exercise their options and cash out.

Approach 2

Give a percentage of the increase in tax revenues from a particular constituency back to the MLAs, MPs, and council of ministers (that includes chief minister). This can be thought of as a legitimate commission money for the liaison work of the representative with the business and governments on behalf of the citizens of the constituency. Actually that is what we want our representative to do. But only now we are talking about paying the commission money to the representative for the work he does.

Let us say that Manamadurai tax revenues as 50 Crores as of 2001. In 2002, the income tax revenues of Manamadurai is 70 Crores. So, the MLA, MPs and Chief minister had done something to Manamadurai people to earn more. Hence the people who made this possible should be rewarded. So take 2 percentage of increase in income tax revenues (that is 40 Lakhs). Give this money to the MPs, MLAs and the chief minister. So let 60% goes to the MLA, 30% goes to the MPs, and 7% goes to the State council of ministers and 3% goes to the central govt. council of ministers. LEGALLY!

There are 5 to 10 constituencies in one MP constituency. So the MP will get that 30% from each constituency, which will be more than one single MLA gets. Similarly the State government ‘s chief minister and the council of ministers will get 7% from every one of the 234 constituencies, which in turn will be more than any single MP gets. That is a lot of money! And legally earned in proportion to the work done in the government. Keeping Law and order, streamlining the govt., reducing the waste, reducing crime, increasing the education, providing the better climate for business, providing the better salary for the workers, providing entrepreneurial support, attracting the talent and business to the constituencies and everything that the politicians in the govt. supposed to do are financially measurable and the work can be properly compensated.

To avoid any accounting malpractice, the total amount paid to the MLA, MP and the council of ministers should be adjusted for entire 5 years. That is the real income tax increase after 5 years of the term will be adjusted in the last year, against the previous year ‘s pay out. (It is possible to show negative growth in one year and positive growth in next year without any improvement in citizens ‘ income). The negative growth in a constituency, though not penalized on the MLA or MP, will be advertised by the revenue officials indicating the reason for the negative growth in the income tax revenues.

(The village Panchayats and the city mayors will not get any money, since they do not have much control over the revenue increase in a village. They are more dependent on the MLAs and MPs to represent them to the business people and interact with the State and central govt. to bring the business to the constituencies. If the MLA wants to keep these people happy, he can apportion the money to these people to make them happy. It will be his prerogative. Also the good panchayat and mayoral candidates can do good work towards a popularity. And use that popularity as a stepping stone to be a MLA or MP)


Assume that the TamilNadu index contains the 50 or so companies that are based in TamilNadu. This index will be publicly traded. So everyone can buy and sell this index. If the companies do better, then the index goes up. If they do bad, then the index goes down. This would be a measure of the performance of the present govt. day to day. So any tall claims by a govt. can easily be verified.

Expected results:

Since the pay back is based on the revenue growth (and not on revenue itself), the poorer constituencies will have more potential for improvement. The work will be speeded up in these constituencies. Since the developed constituencies will have more workers, any improvement in the salary of the workers will reflect the MLAs getting a portion of the increase.

Most important thing about the above financial compensation for the betterment of the constituency is that the representative will be forced to work for everyone in the constituency.

As the caste and religious calculations will be secondary to the monetary compensation, he would get for the improvement in the income of all the people in the constituency. (Yes, of course, the money is the great leveler)

This will ensure that the govt. will work for the growth of the companies in TamilNadu so that more and more companies will be listed in the TamilNadu Performance index.

The govt. will also work towards good working environment for the businesses in TamilNadu so that the companies will prosper boosting the value of the TamilNadu Performance Index.

The govt. will work towards good education in TamilNadu ; the workers will be better educated and businesses will hire better quality workers.

Industrialization of the low end jobs will be speeded up, reducing the low value addition for the products. Since the income tax revenues is taken for the compensation, the MLA or MPs is directly will take interest in increasing the number of people who pay taxes and in increasing their salary so that the amount paid as income tax will increase.

There will be a competition among the constituencies to bring the new business to their respective areas. The MLAs and MPs will be directly interested in providing more salary to the workers in the factories.

More people will be motivated by the MLAs to start the factories in the constituencies.

At the end of the 5 years, the chief ministers will leave with more money if they do good.

They will leave with out much loss if they do not do good. Their performance can be easily verified in the TNPIX which will tell how much better environment they provided for the business in TamilNadu.

It is true that the MLAs or MPs will continue their corrupt ways for many more years to come. But the direct and legal financial reward will motivate more educated and knowledgeable people to join the politics and provide a basis on which the representatives will be rewarded legally.

Hurdles towards implementing the above system.

1) The TNPIX TamilNadu Performance index can be created without the government approval. Any brokerage company can initiate and start this index. The options also can be given by the brokerage company to the MLAs, MPs, ministers and Chief Minister. This is perfectly legal. Preferably the index should be created by a well known Mutual Fund or Bank.

2) The pay back of the income tax revenues to the MLAs, MPs, and chief ministers will involve constitutional amendment of the financial and revenue laws in constitution. This would be a big process and the MLAs, MPs and chief ministers can initiate discussions on this towards a performance based pay back for the political work. This pay back should be linked to the constitutional amendment on ceiling for the highest individual income tax at 25%.

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T. Kishore, T. Gopal rao

T. Kishore, T. Gopal rao