Gafni attacks excessive executive pay

“Bank Mizrahi-Tefahot is an example of how we are destroying our society with our own hands,” Knesset Finance Committee chairman says.

April 29, 2010 03:59
2 minute read.
Moshe Gafni.

moshe gafni 311. (photo credit: Ariel Jerozolimski)

Excessive salaries paid to banking and corporate executives are widening the gaps in Israeli society, Knesset Finance Committee chairman Moshe Gafni said Wednesday.

“Eli Yones, the CEO of Bank Mizrahi-Tefahot earns NIS 1.5 million a month,” he said. “What planet does he live on? I’m not envious of people and their salaries. But if a whole community could be supported with a monthly salary of one person, and the cleaning staff of the same bank Yones manages earn minimum wage, it widens and deepens gaps in our society.”

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“Bank Mizrahi-Tefahot is an example of how we are destroying our society with our own hands,” Gafni said.

Momi Dahan, of the Hebrew University of Jerusalem’s School of Public Policy and a researcher at the Israel Democracy Institute, told The Jerusalem Post: “The global financial crisis and the collapse of major banks and companies has clearly shown that there isn’t always a connection between high executive salaries and economic performance of a company.

“The Israeli experience is similar to the US or the UK, where over the past three decades senior managements’ salaries have increased out of proportion to widening inequalities in the economy and society.”

“There are a number of solutions that should be considered to correct the market imperfection,” Dahan said. “I am in favor of raising the tax rate on any earned income above NIS 1 million.”

He said he was optimistic that recent proposals to curb executive salaries are gaining support.

On Sunday, a discussion for the approval of a private member’s bill put forward by Labor MK Shelly Yacimovich and Likud MK Haim Katz for limiting executive pay at public companies was postponed for 60 days at the request of Prime Minister Binyamin Netanyahu. He asked Yacimovich and Katz to delay action on their bill so that the government could prepare its own bill.

A government committee was established to examine the issue of executive pay. It is headed by Justice Minister Yaakov Neeman and includes Finance Minister Yuval Steinitz, Industry, Trade and Labor Minister Binyamin Ben-Eliezer, Welfare and Social Services Minister Isaac Herzog, National Economic Council head Eugene Kandel and Prime Minister’s Office director-general Eyal Gabbai. It is expected to present its recommendations within 60 days.

“Regarding the salaries of executives in the private sector, I am willing to consider various solutions to the problem. But we must study the matter deeply,” Netanyahu said this week. “We are operating today in a global economic world, and first of all we must examine what are the successful solutions that already exist in other parts of the world.

“We must solve the problem of senior executives’ salaries without adopting a solution that will cause the Israeli economy other problems. We need to take steps to ensure that there is no abuse of the free market and free competition to obtain unjustified salaries, while finding solutions that will not cause foreign investors to leave the country or Israeli companies to move investments and activities overseas, which in turn would lead to a loss of jobs in Israel and higher unemployment.”

The bill proposed by Yacimovich and Katz seeks to limit the highest salary in a company to 50 times the lowest salary at that company.

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