The pros and cons of the salary bill

MKs Shelly Yacimovich (Labor) and Haim Katz (Likud) try to address the gross disproportion in Israeli salaries.

The bill filed by MKs Shelly Yacimovich (Labor) and Haim Katz (Likud) has fired the imagination of large sections of the population in a way that many bills initiated by individual MKs, as important as some of them may be, almost never do.
The reason for this is the gross disproportion between what most Israelis earn, even those who are fairly well off, let alone those who earn the minimum or close to the minimum wage, and the small number of CEOs at the top of the economic pyramid.
Many of these CEO salaries are astronomical. For example, the economic daily The Marker reported recently that in 2009, Chaim Katzman, chairman of the board of Gazit-Globe, earned NIS 1.566 million a month; Eli Yunis, CEO of Mizrahi-Tefahot Bank Ltd., earned NIS 1.55 million; and David Avner, CEO of Partner, earned NIS 1.516 million.
The figures are so jarring that each year, when the salaries of the CEOs in companies traded on the stock market are published, the same ritual repeats itself. Politicians declare that the situation is unacceptable, immoral and demoralizing.
However, not all politicians mean what they say, as proved in the events of Sunday, when the Ministerial Committee for Legislation was due to vote on a bill to reduce the gap between the highest and lowest earning strata of these companies.
The bill, sponsored by Yacimovich and Katz, called for preventing the CEOs from earning more than 50 times the salary of the lowest paid employee in a company. The logic of the bill is that if the directors of a company want to reward the CEO because he has increased the company’s earnings, it should also reward the lower rungs of employees for the good work they have obviously done.
In the final analysis, the two MKs expected that the eye-popping salaries of the CEOs at the top of the pyramid would decrease and become more palatable to the rest of society.
Prime Minister Binyamin Netanyahu and Finance Minister Yuval Steinitz are among the politicians who make the annual tut-tutting statements about the disproportionate salaries made by the CEOs. But on Sunday, when they saw there was a genuine chance that the ministerial committee would back the bill that would cap these salaries, they panicked and ordered it to be withdrawn from the agenda.
Instead, Netanyahu announced that he had appointed Justice Minister Yaakov Neeman to chair a ministerial team that would submit recommendations within 60 days “on how to resolve the issue of exaggerated executive salaries without harming the Israeli economy.”
Shlomo Swirsky, the academic director of the Adva Center, told The Jerusalem Post that “even though the bill does not cope with all the complexities of the matter, it is a very important one. It’s important to shake up the system.”
He warned that Netanyahu’s decision to appoint a committee instead of supporting the Yacimovich-Katz bill “demonstrates his unwillingness to deal with the issue. He will bury it in the committee.”
Swirsky added that the trouble with the proposed legislation was that there were ways for companies to get around it. It does not plug all the holes, he said. He added that the bill should have also called for an increase in taxation rates for those who earn such large sums of money.
Noga Keinan, director-general of the Israeli Forum of Chief Financial Officers, told the Post she opposed the bill because it combined two different aims that had nothing to do with each other.
The first was the desire to increase minimum wage salaries, an aim she agreed with.
But, she continued, this had nothing to do with restricting the highsalaries of the CEOs – a phenomenon that made two major contributionsto society.
First, it provided for upward mobility for those not born to wealth.She said that she had examined the biographies of the 20 top-earningCEOs in the country. She did not find data on all of them, but amongthose about whom she did find data, six came from middle-to-lower orlower-class backgrounds.
“There is an educational value to these wages,” she said. “One does not have to be born to wealth to become wealthy.”
Second, the creation of a new wealthy class meant that the number ofpeople at the top of the economic pyramid would expand and no longer beconcentrated in a small number of families who own most of thecountry’s wealth, she added.