Cabinet considers cap on CEOs' pay

Ministers to vote on bill limiting salaries of public company heads

April 25, 2010 04:43
1 minute read.
Netanyahu cabinet meeting

Netanyahu cabinet 311. (photo credit: Ariel Jerozolimski)

The Ministerial Committee on Legislation is due on Sunday to consider a controversial bill aimed at limiting the salary of the heads of public companies to 50 times the salary of the lowest paid worker.

The bill was sponsored by MKs Shelly Yacimovich (Labor) and Haim Katz (Likud). In the explanation to the law, they wrote, “In recent years the salaries of company heads, especially those of public companies, have escalated to sums that have become a way of avoiding paying dividends to investors and of establishing a payment track that is separate and detached from the other payment tracks in the company. As a result, we see widespread salary reductions and increasingly widespread employment of workers who earn especially low salaries, while company directors take for themselves salaries that amount, in some cases, to a couple of million shekels per month.

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“This bill attempts to moderate that trend without breaking the rules of the free market. There is a consensus that the problem has reached unreasonable proportions.”

The MKs added that their proposal did not place a ceiling on the amount of money that a company head may earn. However, if the board of directors wants to reward the head of management because he has earned good profits for the company, it will have to reward the lowest earners as well, by raising their salaries to maintain the 50:1 ratio prescribed by the legislation.

The lawmakers pointed out that between 2000 and 2006, productivity in the business sector increased by 9.1 percent, while salaries went up by 1.8%. They also quoted figures from the Adva Center, an economic and social research center, which found that the average monthly salary of heads of public companies increased between 2003 to 2006 by 34.8%, from NIS 1.55 million to NIS 2.09m.

According to the MKs, similar proposals had been raised in the previous three Knessets, but were defeated each time.

There are 19 cabinet members in the Ministerial Committee on Legislation. According to Channel 10 News, eight of them have gone on record as supporting the bill and several others said they had not made up their minds.

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