Naftali Bennett 370.
(photo credit: Marc Israel Sellem/The Jerusalem Post)
Economy and Trade Minister Naftali Bennett and Israel Securities Authority
Chairman Shmuel Hauser on Sunday clashed over the extent that pyramid companies
should be limited in the market-concentration reform.
companies refer to structures in which one large company owns several
subsidiaries that own more subsidiaries. Controlling stakeholders of the company
at the top of the pyramid can make decisions for all the companies lower down in
the chain, even though they hold only minority shares in some of
“The law is good, but it’s not good enough,” Bennett said. “I call
for limiting the layers in the pyramid to two levels alone in a speedy
In the original concentration bill, which the cabinet approved
in 2012 but never passed into law, existing companies would be limited to three
pyramid levels, but new companies would be limited to two levels; for example,
subsidiaries would not be allowed to own subsidiaries. Breaking up pyramid
companies, together with separating ownership of financial and nonfinancial
institutions, was one of the pillars of bill.
“The current situation is
such that a few stockholders play with the public’s money without
responsibility,” Bennett said. “One family can hold 3 percent of a company and
then control its finances and decisions. This is a situation that is not
On average, the noncontrolling shareholders of companies at the
top of the pyramid represent 40% of the shares.
That rises to 55% in the
second level, 65% in the third, 80% in the fourth and 91% in the
Hauser, on the other hand, thought three levels were preferable,
though he agreed with Bennett that setting different levels for old and new
companies did not make sense.
“Even at three, we’re at the world average
or lower,” Hauser said. More stringent limitations could be detrimental to the
market, he said. The restrictions apply not just to the companies that would
have to break apart and sell their pyramid structures, but also to potential
buyers, he said.
If limiting pyramids to three levels didn’t break the
concentration, Hauser said, the regulations could become more stringent further
down the line.
Given that Israel was breaking regulatory ground with the
last, meant it should tread cautiously.
“Nowhere else outside of Israel
has broken apart pyramids,” he said. “Why in Israel? Apparently Israel went
Eugene Kandel, head of the National Economic Council, said
since the original concentration recommendations were passed, the market had
taken care of part of the problem on its own.
The 112 companies in
pyramid structures today are about half the number there were just a few years
ago, he said.
Of those, 28 are third-level companies, 12 are fourth-level
and only three are fifth-level. In other words, while 15 companies will
definitely need to be sold off once the legislation passes, the fate of the 28
companies at level three hang in the balance.
comparisons, Israel lies on the high end of market concentration, with the top
10 families controlling 30% of the companies. In Sweden, the Philippines and
Indonesia, the figure fell between 50%-60%, while in the UK it was 5%.