Israel Electric control center in Haifa.
Israel Electric Corporation's control center in Haifa. Photo by Tomer Neuberg
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After the many decades in which security dominated Israeli election campaigns, the 2013 vote is shaping up to be the most socially conscious election in Israel in years – whatever that means. Social issues are poised to play a key role in shifting the balance of seats in the Knesset. This is evidenced by Labor's Shelly Yacimovich, who is deftly avoiding policy questions, Yair Lapid’s Yesh Atid, which aims to conquer middle-class voters, and even that brief moment when it seemed Moshe Kahlon would go at it alone.

What, exactly, do we mean by "social issues"? What society are we talking about? If we're talking about increasing resources allocated to social services, where will that money come from? Do said social services include bailing out companies that politicians rely on? Forget trying to find answers at the moment – now is the time for catchy slogans and overused cliches that muddle ideas rather than clarify them.

But if someone actually does want to create a viable social-issues platform, the best place to start is the Israel Electric Corporation. The IEC, which has a huge impact on Israeli society, serves as a case study for all the larger economic issues: It scandalously mismanages public funds, gives priority to insider interests and suffers from irresponsible management. Politicians and public officials are to blame for its impotence.

It's doubtful that any candidate, let alone those from the so-called social issues parties, will dare speak out against the mismanagement of the IEC. With the flick of a switch, a candidate could alienate a voting bloc of 17,000 employees, retirees and their families. This is not the time to mess with them.

The IEC knows this all too well. Thus continues the well-worn tradition of wasting public money, knowing the public purse will cover the company's every mistake. Last week, Haaretz reported that the IEC made an urgent appeal to the Finance Ministry for an immediate cash injection of NIS 1.4 billion to cover a miscalculation regarding cash flow through the end of 2012. The IEC reported the mistake about a month ago but failed to locate the cause of the error. More important, since then the company has yet to find a solution to its cash flow shortfall. And why should it? Since the treasury and the Knesset Finance Committee regularly plug up IEC's holes, the company has no clue how to implement its own alternative solutions beyond turning to public funds.

In a reasonable business, you'd first look at IEC's cost structure and identify where fat could be trimmed. But for years, the IEC has only been looking at its revenue structure. Moreover, the IEC could always increase electricity rates to fill in any cash shortfalls and ensure the continued flow of funds to employee pension funds and excessive salaries.

The sheer audacity displayed by the IEC is astounding: Its recent appeal to the treasury took place just two weeks after the publication of a serious report by the state comptroller detailing the company's reckless financial management. The report found that over the last two decades, the IEC illegally transferred NIS 3.4 billion into its employees’ pockets without proper authorization, pointing to a lack of supervision by the board of directors and other gatekeepers.

“This failure is likely to teach stakeholders at the IEC and other bodies that regulatory and enforcement bodies eventually reconcile themselves to these anomalies, and that their ploys are working,” the report stated.

The government regulators responsible for the company, however, did not demand the money returned.

The conduct of the IEC, whose employees are among the top wage-earners in Israel, reveals tight cooperation between management and workers at the public’s expense. Case in point: TheMarker exposed in 2008 that IEC management created a secret trustee account for its employees, into which they pumped another NIS 2 billion of company money.

The State Comptroller found that the account was opened in 2000 to deposit employee pension funds and money for employee benefits like free electricity, holiday gifts and severance pay. However, according to the comptroller’s findings, since the account was opened, the IEC has not used the funds for any of its stated intentions. When the IEC did make these payments, it did so from cash held in its regular account.

The report contained other serious findings, but the point is clear: The IEC is actually the most socially conscious company in Israel. It looks after its members and showers them with affection that come straight from the public coffers.

Three months to the election, the question remains: Will the government force the IEC to limit its employee trust fund and adopt efficiency measures or will it continue to be the great federal enabler and allow the company to inflate its huge debts at the expense of the Israeli public?