Felice Friedson, CEO Media Line 311 Courtesy.
(photo credit: Courtesy of The Media Line)
companies have more than doubled over the past seven years, the Israel
Securities Authority reported Wednesday.
“The research showed very little
evidence of a correlation between the level of executive salary packages and
performance of public companies,” the report said.
The ISA analyzed
executive salaries at 67 companies listed on the TA-100 Index. It found that
average salaries had increased gradually from NIS 1.6 million in 2003 to NIS
3.7m. in 2009.
Until 2007, salaries rose in line with strong growth in
Although there were signs that salaries and bonuses,
especially those of CEOs and chairmen, had been cut during the global financial
crisis in 2008-09, some salaries continued to rise, the report said.
average salary package of CEOs at publicly owned companies rose gradually from
NIS 2.5m. in 2003 to NIS 5.3m. in 2007, declining to NIS 5m. in
Similarly, chairmen at publicly owned companies earned on average
NIS 3.5m. in 2003, NIS 5.5m. in 2007 and NIS 4.3m. in 2009.
packages of other executives were worth on average NIS 1.2m. in 2003, NIS 2m. in
2007 and NIS 3.3 in 2009.
“Despite a slowdown in revenues and an increase
in losses during the global economic crisis, executive salaries continued to
grow,” the report said.
Africa Israel, for example, was to forced to come
to an agreement with banks and bondholders to restructure NIS 7.5 billion of
debt during the global financial crisis. But last month it announced it would
distribute NIS 7m. in bonuses to its executives.
Base salaries declined
from 2003 to 2009, while stock options and bonuses rose, the report said. In
2003, base salaries made up 73 percent of the average executive pay package,
lowering to 33% in 2009, while the stock component was 4% in 2003 and 22% in
2009. The bonus component rose from 14% in 2003 to 22% in 2009, the report
Compared to other counties, Israel was number 11 in terms of the
highest paid executives on management boards, trailing the Netherlands, France,
Spain, Europe, Italy, Ireland, the UK, Switzerland and the US, which was No. 1,
the report said.
Having independent or external directors on company
boards helps to keep executive salaries and remuneration packages in line, the
In May, ISA Chairman Zohar Goshen issued a directive saying
that the salary package of the five highest-earning executives of a company
should be approved by majority vote at a general shareholders’ meeting after
being approved by the board of directors. He said some boards of directors had
approved salary packages that did not serve the interests of shareholders,
including excessive salaries and an inefficient incentive
Goshen said salaries and incentives should encourage
executives to manage the company in a way that maximizes long-term performance
by focusing on real risks. The focus should not be on setting executive salary
levels but on the procedure for determining and approving salary packages
including parameters such as long-term performance targets and conflicts of
interest between the controlling shareholder and management, he
Prime Minister Binyamin Netanyahu appointed Justice Minister Yaakov
Neeman in April to chair a ministerial committee that would submit
recommendations within 60 days on how to resolve the issue of excessive
executive salaries without harming the economy.
Last month Neeman asked
for a three-month extension so that the committee could finish its work. The ISA
report on executive salaries was submitted to the committee.