Neeman panel: State should not set corporate salaries
In other countries, the state has no role in determining compensation for senior executives, says committee, and state interference could cause greater harm than good.
The state should not be involved in determining executive pay at publicly traded companies, according to recommendations that will be presented for approval to the cabinet on Sunday.
The recommendations were prepared by a committee, headed by Justice Minister Yaakov Neeman, that was appointed last March to investigate the matter. Should the cabinet approve the recommendations, the next stage would be drafting legislation.
The committee members will point out at Sunday's meeting that in other countries, the state has no role in determining compensation for senior executives. They will also note that state interference in the matter could cause greater harm than good.
The committe was set up after Shelly Yachimovich (Labor ) and Haim Katz (Likud ) proposed legislation that would have capped salaries of senior executives at public companies. The committee's members are Finance Minister Yuval Steinitz, National Economic Council chairman Eugene Kandel and two former Labor Party ministers, Isaac Herzog and Benjamin Ben-Eliezer.
The committee is expected to tell the cabinet that the best way to prevent excessive executive compensation is to enhance the independence and oversight powers of corporate boards of directors, improve the system of pay authorization and ensure that public companies adopt orderly wage structures.
The committee will recommend, however, that corporate policy relate to criteria that would be spelled out in legislation and that it include salary caps and other provisions the law would provide. It also makes an exception in the case of companies that are part of a pyramid-type corporate group, where the controlling shareholder may have more power and where the dynamics are different.
The committee will recommend that a mechanism be put in place that ensures that wage structures in all public companies serve the interests of the companies' investors as a whole, promoting long-term returns that are consistent with corporate policy.
Publicly-traded companies should be required to adopt compensation policies that further long-term corporate policies and goals as well as the company's business plan, while also taking into account the risks the company faces, according to the committee's recommendations.
The committee has proposed that compensation at each public company be determined by the board of directors and be contingent on prior approval by the control committees. The overall policy should also be submitted for review to a general shareholder meeting and receive approval by a special majority. Absent this approval, salaries would have to resubmitted to the board for approval, and its members would have the final say on the matter.
Tycoons to put up a fight
Under extenuating circumstances, companies would be entitled to make exceptions to their compensation policies, but only with the approval of the control committee, the board of directors and a general meeting of shareholders.
The Neeman recommendations are based on the assumption that in publicly traded companies, there is typically no incentive to pay office holders compensation beyond what they entitled to. As a result, the final decision should be left to the board of directors, which has the expertise and knowledge to make such decisions.
The situation is different, however, when a company is part of a pyramid-type corporate business group, according to the committee's recommendations, in which case the controlling shareholder's interest is not the same. The reason is that there is greater incentive under these circumstances for the controlling shareholder to pay excessive salaries as a way of increasing the dependence of executives on the shareholder, to the disadvantage of other shareholders.
Among these companies, the Neeman committee proposes that salaries be approved by public shareholders representing a majority of shares not held by the controlling shareholder or other parties with a particular personal interest.
The cabinet is expected to propose legislation based on the Neeman committee recommendations before the Knesset's Passover recess at the end of March. After a first reading, the legislation will be considered by the Finance Committee, which is expected to come under heavy pressure from lobbyists and wealthy business people to water down the provisions.
EasyJet apologizes for ham-only food on flight from Tel Aviv to London
A four-hour easyJet flight from Tel Aviv to London's Luton Airport was mistakenly loaded only with food that many of its passengers could not eat. The only two meal choices for sale on the four and a half hour flight last weekend were ham melts and bacon baguettes, and many passengers went hungry, London newspapers reported this week. Muslims, like Jews, are also forbidden to eat pork products. An easyJet spokeswoman apologized to the passengers, saying there had been a mix-up on the ground and the wrong meals were loaded onto the plane. The route began running in November, and a month before the first flight a kosher menu had been prepared by Hermolis, a kosher caterer in London, the newspapers said. "For flights to Israel, easyJet's standard practice is to offer kosher and vegetarian sandwiches on board. We do also offer non-kosher products on board these flights, but it is our policy not to load any pork products," said an easyJet spokeswoman. (News Agencies )
Kika gets approval: But will it beat IKEA?
Austrian furniture chain Kika is finally going to start building its first store in Israel. The appeals panel of the central district planning and building committee rejected the last objections to Kika's new store near Netanya yesterday. The facility is expected to be finished by the end of the year. Local businessmen had objected to the Kika branch, claiming it would drive commerce out of the city and that it violated zoning restrictions for the area. The question now is whether Kika will open its store before rival IKEA finishes rebuilding its burnt-down Netanya branch. (Shlomit Tzur )
Rare labor dispute at Defense Ministry
Employees at the Defense Ministry have officially announced a labor dispute. The Histadrut labor federation approved the request from the ministry's union, and after a mandatory two-week cooling off period the workers can implement work sanctions or even strike. Such a labor dispute within the defense establishment is quite rare. The union is protesting a reorganization in the ministry that was made without its consultation, and which it fears will lead to firings. The ministry's management says the changes are part of an efficiency program built into its multi-year plan and budget, and that the changes will not harm workers. (Haim Bior )
Israeli roads home to nearly 3m vehicles
Israeli roads were taken up by 2.73 million vehicles as of December 31, 2010, an increase of 3.8% from 2009, including 2.11 million cars. The average age of these vehicles was 7.1 years, similar to the figures seen in 2009. For cars alone, the average age was 6.9 years. Some 117,000 motorcycles, scooters and various other two-wheelers were on the road, along with 59,000 trucks, 31,000 buses and 21,000 taxis. Another 302,000 commercial vehicles, such as vans and pickup trucks, also filled the roads. Cabs were relatively young, as the average age of a taxi in 2010 was only 2.4 years. In addition, some 701,400 cars were bought and sold last year, new and used. (Daniel Schmil )
Few employers are fined for labor violations; and fewer still ever pay up
Between 2007 and 2010, only about 300 fines were imposed on employers who violated their workers' rights and about half of those fines were never paid, according to the Industry, Trade and Labor Ministry. The figures were presented to the Knesset's Committee on Immigration, Absorption and Diaspora Affairs at a hearing Tuesday by ministry representative Ravit Tichover. She said the fines issued during that period came to a total of NIS 4.44 million. Tichover added that the number of labor complaints to the ministry has surged in recent years, to 4,607 in 2010 from 801 in 2005. Any company competing for a government tender must provide information regarding its compliance with labor laws and must disclose whether complaints have been filed against it or fines imposed for violations of labor laws. (Zvi Zrahiya )
Shares tumbled on the Tel Aviv Stock Exchange yesterday as worries about the upheavals in the Middle East sent world markets down and oil prices climbing. Stocks started the day down only a shade, and the blue-chip TA-25 index even entered the green an hour and a half before closing. But then the screens turned red and indexes dropped across the board.
The benchmark TA-25 lost 1.4% for the day to fall below 1,300 points and close at 1,295 points. The broader TA-100 dropped 1.2% to end at 1,198 points. The Banks-5 index tumbled 1.9% and the Real Estate-15 was off 0.8%. The oil and gas exploration index eased 0.3%. Turnover was about average for recent trading at NIS 1.9 billion.
Of course, there was another theory on why Israeli stocks tumbled: February options on the TA-25 expire this morning and market sources said options traders were preparing their positions for the expiry.
"A trader who is short tries to lower the indexes as much as possible. If [the trader] tries to lower the indexes [this morning], lots of institutional investors will be waiting to buy, and it will cost him. It's cheaper to do it [yesterday] near the end of trading," said the trading room manager at a large investment house.
Both government and large-cap corporate bonds rose slightly yesterday. Monday's news seems priced in - that Bank of Israel Governor Stanley Fischer is raising March interest rates by 0.25% to 2.5%.
The dollar was unchanged against the shekel yesterday at a representative rate of NIS 3.634, while the euro was up 0.4% to a representative rate of NIS 4.992. This reflected trading in global forex markets, where the euro and pound rose against the dollar as investors bet that the European Central Bank and the Bank of England would lift interest rates before the U.S. Federal Reserve.
Global markets were down after Wall Street on Tuesday showed its biggest drop so far this year and its worst since August. The MSCI world equity index was down 0.5%. U.S. economic news also spooked markets yesterday as U.S. home prices plummeted to an almost nine-year low.
Gold topped $1,400 an ounce and oil prices rose to fresh two-year highs around $96 a barrel, their highest level since October 2008, amid concerns that a violent power struggle in Libya could disrupt supplies. Experts warned that the coming weeks and months would prove highly volatile.
They said that if the chaos spreads to other bigger energy producers in the region such as Iran or Saudi Arabia, price fluctuations could become as sharp as those in the 1970s, when an OPEC embargo caused gasoline shortages in the United States.
Oil and gas shares down
Oil and gas exploration shares stayed in the spotlight after the Pride North America drilling rig arrived at the Leviathan offshore field this week. The Leviathan partners were mixed yesterday after big gains on Tuesday. Avner Oil Exploration lost 1.1%, Ratio Oil Exploration rose 1.9% and Delek Drilling fell 1%.
Partner Communications dropped 1.9% as the company released its 2010 financial report. (See Page 8. )
Elbit Systems fell 1.7%. The firm won a Defense Ministry tender to operate and maintain firefighting aircraft for the next four years.
With reporting by news agencies.