The limits to greed

As the Hapoalim and Discount scandals highlighted, the corporate culture of shameless greed is being exported to Israel.

October 5, 2006 23:45
3 minute read.
bank hapoalim 88 298

bank hapoalim 88 298. (photo credit: Ariel Jerozolimski)


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The fact that the heads of Bank Hapoalim are to return a large chunk of the outsize bonuses they were awarded earlier this year is, as Securities Authority Chairman Moshe Teri noted, a milestone event. This is true not only in the local context, but also in a global one. Yet to say so, much less to praise Hapoalim's chairman Shlomo Nehama, its CEO Zvi Ziv and its board, is not acceptable behavior in Israel. The news of the decision was reported, grudgingly, in the media - more because they had no choice, after the massive coverage awarded the whole scandal, than out of any sense of hailing an achievement, let alone a "milestone event." This is because to even suggest that the big banks and top bankers could conceivably do anything positive, let alone advance the wider public interest is the height of political incorrectness. This anti-bank mania was deeply entrenched long before the post-Lebanon war trauma took hold, under which anything positive about any aspect of Israeli life is anathema. In enlightened circles, among people whose standards of living are entirely due to the achievements of Israeli businessmen, financiers and, perish the thought, government officials, Israeli capitalism must be described as disgusting, its practitioners as loathsome. Within this pantheon of villains, senior bankers are in a class of their own. Merely suggesting that they are anything less raises suspicion - nay, provides overwhelming proof in and of itself - that the author of such a claim is, in the best case, pitiably na ve and, in the more likely worst case, another paid lackey of the Big Banks. Having penned more criticism of more Israeli bankers, over a longer period, than anyone else - much of it in this paper -- I have no hesitation is suggesting that Nehama and Ziv deserve high praise for doing the right thing, however belatedly. This in no way invalidates the widespread and vehement criticism regarding the awarding of the bonuses in the first place. On the contrary: the more convinced you are that the Hapoalim duo acted in a stupid and crass manner by arranging for and accepting the absurdly large (by Israeli corporate standards) bonuses, the more forthright you should be in applauding their correction of that behavior. The fact that this correction came in the wake of a public campaign and of pressure exerted by regulatory agencies, helps explain how Hapoalim (and Israel Discount Bank, in a parallel and even more crass and stupid bonus scandal) came to their senses but doesn't make their moves unpraiseworthy. By extension, it highlights the obtuseness of Hapoalim vice-chairman Dani Dankner in refusing to join his colleagues in returning part of his bonus. But the true importance of the bonus scandal is much wider, as Moshe Teri clearly grasps but apparently many others can't or don't want to. This is a very high-profile illustration of the fact that concepts such as "public opinion," "public pressure" and even "moral considerations" are actually alive and well in Israel, despite the widespread belief - enthusiastically promoted by the unholy alliance of post-Zionist leftists and messianic rightists - that they are dead and buried. Compare this to the country regarded as the benchmark of capitalist achievement - the US. The idea that the heads of a dominant American financial institution (did anyone say Goldman Sachs?) should agree, or be persuaded, to forgo or return part of their vast annual bonus, without their having broken any law but simply on grounds of moral outrage, is patently absurd. That's because the whole concept of moral outrage, indeed of morality of any sort, can no longer be applied to the American financial sector, or indeed to the issue of executive pay in any sector. The top echelon in corporate America is now a club in which CEOs and their cronies sit on boards and award each other increasingly mind-boggling sums, in the knowledge that doing unto others what you would have them do unto you is a winning formula. This despite the numerous studies proving that there is no connection between corporate profits and how much the heads of these corporations make. The statistics illustrating the growing gulf between the average pay of the top executives and that of the work force as a whole require no "studies." They scream out the fact that greed has run amok in Wall Street and corporate America generally and is no longer constrained by moral or behavioral norms. With a certain level of income comes, as an automatic bonus, a skin thick enough to be impervious to the whining of the envious plebs. The problem is, as the Hapoalim and Discount scandals highlighted in the first place, that the corporate culture of shameless greed is being exported to Israel. The danger therefore is that the event is just a milestone, not a turning-point.

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