Government corporations are still rife with nepotism, despite pledges to reduce the phenomenon and provide equal employment opportunities, State Comptroller Joseph Shapira determined in his latest report, published Wednesday.
From May through December 2013, the State Comptroller’s Office examined the employment arrangements for seven public corporations: the Ashdod Port Company, the Haifa Port Company, Mekorot Water Company, Mekorot’s Shaham subsidiary, Israel Railways, the Israel Electric Corporation, and the Israel Airports Authority.
Such firms are all subject to the 2005 Government Companies Regulations regarding nepotism, which were extended in 2008 and in March 2014, following the completion of the current state comptroller audit.
While the investigation indicated a declining rate of favoritism in the employment of close relatives among all the companies, the phenomenon of nepotism is still prevalent – and creating conflicts of interest, the report concluded.
“Recruitment and employment of relatives and close associates in public bodies is likely to harm their fiduciary duty to the public, as well as the provision of equal opportunities and adequate representation of all population groups,” the state comptroller wrote.
The companies examined were not punctilious about preventing the hiring of relatives of employees into positions of a subordinate relationship or bringing them into roles that create a conflict of interest – despite state comptroller warnings in previous reports that the phenomenon still exists, Shapira wrote.
Examining the Ashdod Port Company, the comptroller found that the employment of close relatives and friends remains problematic, despite the management’s responsibility to prevent such occurrences.
Shapira demanded the removal of any obstacles that might be impeding the enforcement of such standards at the Ashdod Port.
While in December 2005, about 44% of Ashdod Port workers had relatives employed at the company, by the completion of the audit in May 2013, about 36% had relatives employed there.
Violating the regulations requiring equal opportunity employment, the Ashdod Port Company extended a tender for dockworker positions from November 2006 to October 2011 – preventing the hire of other qualified candidates. In 2007, the company hired 102 out of 156 candidates it had rated with the highest application scores, 33 of whom had relatives working at the port at their time of hire. Of an additional 41 dockworkers hired in 2011, 14 had relatives working there, the state comptroller said.
Going forward, the Ashdod Port board of directors must take pains to reduce the serious phenomenon of employing people’s relatives and continue the downward trend that began in 2012 and 2013, during which only a few family members were hired, the report concluded.
In the Haifa Port Company, Shapira wrote that most issues of nepotism raised in previous reports had been remedied, and the proportion of workers with relatives and friends working there had fallen from 25% in the previous review to 22% in this audit. Nonetheless, the problem has not disappeared entirely and still requires further action in Haifa as well, the report stated.
In May 2013, the Haifa Port Company hired 70 family members in the same departments, with 61 of them employed in the 411-member department of operations and mechanical equipment sector.
“The company must find a solution for the prevention of conflict of interests as a result worker relationships between close family members in the same unit,” the comptroller said.
Favoritism among relatives and friends during hiring processes at both Mekorot and its subsidiary Shaham is still problematic, according to Shapira.
Despite previous criticisms made by the State Comptroller’s Office, departments at Mekorot and Shaham hired relatives of existing employees in the same units as their relatives, the report said. Such employment occurred without proper public process and without competitive and equitable conditions, the state comptroller added.
As of April 2013, the percentage of workers those with relatives at Mekorot was 8.7% while at Shaham was about 6% – in comparison to 14% at Mekorot in December 2005, before some Mekorot workers were transferred to the subsidiary.
Eleven out of 353 employees hired at Shaham between January 2010 and April 2013 had relatives working there, while five others had relatives working at Mekorot, according to the report. Rather than providing equal opportunities, recruitment occurred through recommendations of existing employees, the state comptroller wrote.
Although only about 1% of the 657 employees hired by Mekorot in 2008 through 2012 had relatives working there – reflecting a decline in comparison to the previous report – the documentation of the selection process was only partial, the report said.
As far as Israel Railways is concerned, Shapira found that most of the deficiencies raised in previous reports had been corrected. The proportion of relatives working together at the company has decreased significantly due to early retirement as well as reducing the hiring of family members of existing employees, the report said.
By the end of the audit, only 11% of workers at Israel Railways had relatives working there, as opposed to the 13% rate in the previous review, according to the state comptroller.
At the Israel Electric Corporation, the state comptroller found that there has been some reduction in the trend of hiring relatives of employees, but that a certain amount of nepotism remains. This phenomenon generates conflicts of interest in company operations, Shapira wrote.
Within the IEC, there are 25 employees who have relatives in positions subordinate to them, the report said. Although the rules prescribed in the regulations do not apply to family members employed by the company before the regulations entered into force – April 2005 – subordinate relationships between relatives create conflicts of interest regardless, the state comptroller determined.
The percentage of employees with relatives at the IEC was 23%, in comparison to the 27% in the previous review – but this rate of nepotism is still high, Shapira stressed.
Like many of the other government companies, the Israel Airports Authority also has a relatively large proportion of relatives of existing employees working within the company, according to the state comptroller.
About 25% of employees at the authority have relatives working there, while the past indicated a much higher 35%.
Despite this decline, the comptroller found that the Airports Authority is still prioritizing granting tenure to employees who have relatives working at the company.
“The authority must do everything required to reduce these phenomena and take care of repositioning workers who have relatives in the same unit, are subordinate to them or are subject to conflicts of interest,” Shapira concluded.
In response to the criticism, the Israel Airports Authority said that it is adopting the recommendations of the State Comptroller’s Office. In the years 2010 through 2012, the authority recruited 1,75 employees, 4.6% of whom had relatives working there, in light of previous recommendations of the state comptroller and under the guidance of the Civil Service Commission, the authority said.
“The number of worker recruits of family members is declining compared to years past,” a statement from the authority added.
The Ashod Port Company, which also received heavy criticism in the report, said that “the State Comptroller’s Report refers to the reality that existed until 2013.” Since then, acting CEO Yitzhak Blumenthal took office and is implementing the government companies regulations regarding nepotism. In the last dockworkers tender, the board of directors did not approve the employment of all the candidates who had relatives working at the port, the company said.
In 2013, the Ashdod Port Company hired 29 employees, of which two had relatives there, while in 2014 thus far the company hired 43 employees, of which one has a relative there, data from the firm said.
“The percentage of employees with relatives at the port is on a steady decline from year to year,” a statement from the Ashdod Port Company said.
“The reduction in the number of relatives among port workers will continue in the coming years, with the retirement of more and more veteran workers, while recruiting new workers in accordance with regulations regarding the issue of nepotism.”
As far as the Israel Electric Corporation is concerned, the company stressed that it has been working hard to significantly reduce the employment of relatives, and the phenomenon has experienced a dramatic decrease in the few several years.
The company and the board of directors is working according to even more stringent regulations than required by the state, the IEC said.
Only 5% of job applicants selected in 2013 had relatives working at the firm, compared to 30% of successful applicants in 2003, according to the company.
“There is no doubt that there is much work still to be done and that the nepotism that was built steadily over many dozens of years cannot be eradicated in one day,” a statement from the IEC said.
Nonetheless, the company emphasized that the reduction trend will continue despite the fact that most of the company’s workers – many of whom have family members there – are seasoned and experienced members of the firm, the company said.