The Knesset Ministerial Committee on Legislation on Sunday approved a bill to curb high levels of executive pay in financial institutions, stipulating that payment above the NIS 3.5 million (about $1m.) threshold will not be tax deductible.

“This law will curb executive pay in financial bodies and of public fund managers,” Finance Minister Yair Lapid said.

“The law is an important stage in the path we are leading to reduce the wage gaps in the economy.”

Lapid specifically called out Phoenix Holdings Ltd. CEO Eyal Lapidot for his NIS 10m. compensation. “This is not capitalism and not a free market, but simple unbridled greed,” he said.

Financial institutions will be required to report all salaries in excess of NIS 3.5m., but there will be exceptions. In public companies, a special majority of minority shareholders will be able to approve higher salaries. In private companies, a majority of outside or independent directors will be able to increase the pay.

Meretz chairwoman Zehava Gal-On said the bill was a step in the right direction but did not go far enough and had too many loopholes, such as excluding bonuses.

The limit was “ineffective because it is an amount that is too high, which lets half of high earners in the financial institutions evade the limitation and continue getting exorbitant salaries at the expense of the public,” she said.

Gal-On suggested expanding the rule to all publicly traded companies and setting the limit for benefits on executive pay at 15 times the minimum wage.

When Lapid first unveiled the policy in April, Israel Securities Authority Chairman Shmuel Hauser cast doubts about its effectiveness, arguing that drawing a line in the sand at NIS 3.5m. would actually encourage those making less to demand salary increases.

Supervisor of Banks David Zaken, on the other hand, said the policy would help shape better future norms.

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