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"Management pay at the companies on the Tel Aviv Stock Exchange is scandalous," stated the chairman of a well-known company on the TASE, in an email to us. "It is theft. There is no other way to describe it."

Robbery in broad daylight? "Nonsense, it's all the free market," counters the manager of a big bank. "Competition is intensifying, there are business opportunities, and the owners have to put their hands into their pockets and pay talented management a competitive wage."

The above two quotes more or less reflect the two poles of opinion about management pay. Theft or free market. How did a division like that arise?

Simple. The ones claiming executive pay has become scandalous are usually the company owners who have to pay it. Every shekel paid to the hired help is at their expense.

The ones claiming that it's all free market are usually the hired help, or controlling shareholders who happen to hold high office in their own companies, and set their own pay levels.

 Take Pini Cohen, the chief executive of the giant real estate investments company Africa Israel (TASE: AFIL). Yesterday the company published its financial statement for 2005, showing record profit of NIS 650 million, after seven prosperous years in which its share price has risen roughly 500%.

With results like that, one might expect Cohen to be a zillionaire. But he isn't. His wage cost was NIS 4.3 million in 2005. He barely scratches the bottom of the list of the 25 best-paid hired executives among the Tel Aviv-listed companies.

Why is Cohen deprived relative to the TASE fat cats? Doesn't Lev Leviev, who owns the controlling interest in Africa Israel, know how to value talent?

We can hazard another guess. Leviev, who is fast climbing the ranks of the world's billionaires, himself takes merely symbolic pay from Africa Israel. He isn't milking the company and therefore, has no need to lavish enormous pay on his executives to justify grabbiness.

Africa Israel stock from 2000

Tower of cream

While Cohen is producing gigantic profits at Africa Israel and the company is becoming one of the 10 biggest on the TASE, there's Udi Vardy-Zer over at Housing & Construction (TASE: HUCN) smiling all the way to the bank. His wage costs came to NIS 6 million in 2005, and then there's his NIS 60 million chunk of stock.

Housing & Construction, which is controlled by its own workers and the Arison Investment group, can boast very little success. Since its initial public offering ten years ago, the company has prominently underperformed its peers. Investors in Housing & Construction have known little but bitter herbs while Vardy-Zer has waxed fat on stock and salary.

Why are the Housing & Construction shareholders willing to watch him grow rich while they do not? Perhaps because they already made their big money ten years ago, when buying the company from the Histadrut labor federation at a third of its fair price.

Many of the names earning the most are either controlling shareholders or owners who are helping themselves without restraint. If you want to elucidate whether a particular manager's pay really reflects competition over talented management, don't look for answers in the company's financial statements or share price. Start with its ownership structure. Are there fat cats on top who have to toss pieces to the mice below, so they can continue to lap their cream in peace?