Comptroller Report Reveals Widespread Nepotism in Gov't Companies

An estimated 25 percent of all gov't employees are relatives of someone else in the firm.

Guy Leshem
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Guy Leshem

The findings in an across-the-board investigation of a series of government energy, infrastructure and communications companies, as well as the Airports Authority, conducted over the past two years by the State Comptroller's Office, are particularly grave. For the first time, the investigation reveals the sheer breadth of the phenomenon, within companies controlled by strong unions, of the hiring of relatives.

The limited investigation conducted within Israel Railways, Israel Post, Petroleum & Energy Infrastructures Ltd. (PEI), the ports of Haifa and Ashdod, Mekorot water company and the Israel Electric Corporation (IEC) revealed that 6,200 of the 28,000 employees of these companies are relatives of someone else in the firm. Of these, 3,551 are employees of the IEC, 27 percent of whose workers are related to other employees.

But it's the Ashdod port that is the real leader in family ambience, with a record 44 percent of all employees related to others within the company, despite the company's having signed an agreement that limits new hiring of relatives.

The problem of widespread employment of family members in large government firms has been common knowledge for decades, although never before has it been investigated so thoroughly. Earlier investigations by the comptroller's office and by the Government Companies Authority itself have warned of the scope of the problem, and regulations addressing the issue were drawn up.

But in the companies investigated, the new regulations were filed away, and administrators ignored their existence.

The Israel Railways' board of directors has still not approved directives governing the hiring of workers, even though the railroad became a government company more than two years ago. In the ports, unions continued to control the hiring of new workers, in spite of the promises made and signed on when the ports were made government firms, as part of the port reforms that began in February 2005. "Representatives of the union in the hiring committee have tended to give a particularly high rating to candidates with family members already employed in the port, and particularly low ratings to other candidates, reducing the chances of [non-related] employees being accepted for work," the comptroller writes in his report.

In Mekorot, the state water company, unions have such a strong influence that the management has left hiring of temporary workers wholly in their hands. The comptroller found that Mekorot has been using the "bring-a-buddy" method in its hiring campaigns, with the full acquiescence of its management. At Petroleum & Energy Infrastructures (PEI), where human resources managers and the workers union have in the past turned the company into an active branch of the Likud party, registering employees for party membership, this time the comptroller found that in some cases the company had not even bothered to draw up a directive requiring public advertisement of positions that were open.

The Israel Electric Corporation (IEC), in which the 2003 comptroller's report already noted a high rate of nepotism, regulations were amended. But the phenomenon did not decrease even after the amendments, and in some cases, such as the "103" call center, even increased.

Have a raise, bro' The state comptroller makes no attempt to measure the financial damage caused by nepotism in these businesses, but points to a series of conflicts of interests and cases of subordination of employees to immediate family members, problems found in every company that was investigated. The comptroller found many cases in which employees had made decisions, for instance on career advancement and upgrading of benefits, related to workers who were their own close relations.

At Israel Railways, for instance, the vice president for administration signed his own son's employment agreement, the manager of administration and human resources recommended the promotion of her own son, the national supervisor and instructor of train engineers authorized his nephew to drive a train, and the head of the department, his nephew's superior, recommended the latter's promotion and additional benefits.

Over the years, human resources managers in the companies investigated apparently gained the impression that no one was looking over their shoulders in matters relating to employment of relatives. At the IEC, where many internal reviews have been conducted, the comptroller found that in spite of a report published on the matter four years ago, human resources managers continue to handle issues related to employees who are their own relatives. As if this weren't enough, 34-64 percent of all senior staff in the IEC have relatives in the company, as compared to 25 percent among a sampling of all employees.

A particularly absurd instance of the situation in which family members hire other relations, and benefit from trusting relationships with them, was highlighted in the Israel Railways, where the human resources manager served as the direct superior of her daughter-in-law. Not surprisingly, the manager chose her daughter-in-law to stand in for her in her absence.

Who's in (the union)? The state comptroller's report reveals that the phenomenon of nepotism is particularly widespread among management and union members, and higher than the overall averages within government companies. "The findings raise the concern that these employees have used their positions in the company, or power as members of the unions, to bring about the hiring of their own relatives," the comptroller writes. The comptroller mentions, for example the Airports Authority, in which 19 immediate family members and 12 additional more distant relatives of the general union's chairman, Pinhas Idan, have jobs. The comptroller also notes the fact that 13 of 29 union members in the Airports Authority union committee who have served in this capacity since 2000 are related to other authority employees. This situation provides the chairman and his family members with an unreasonable degree of power, which the comptroller is concerned could "result in the deprivation of rights of employees who are not members of the said family, and jeopardize the ability to manage the Authority, and cause management problems to the point of ethical impropriety." Similar situations were also found to exist in Israel Railways and Mekorot.

"There's nepotism in the Knesset too" The Airports Authority workers union committee responded to the State Comptroller's report. "Employment of relatives has been customary for years in the Airports Authority, as was the case in many places of employment. During the period that family members were hired by the Airports Authority, it was not considered an unacceptable norm, and certainly was not against the code of regulations for government employees, employment agreements or Authority regulations. The finance minister issued regulations concerning the employment of family members in government companies only in 2005. The Airports Authority management implemented the regulations within the Authority that year, and determined new and stricter rules regarding the hiring of family members.

"Airports Authority union committee members are chosen democratically and in accordance with the articles of association. Family members are elected and serve in the Knesset too, so it is not clear to us why this would be appropriate in the Knesset but inappropriate in the appointment of a committee. Most family members are employed in junior positions and in physical work, so that when the Airports Authority decided to remedy these 'unacceptable norms,' the stevedores and plane cleaners were the people who paid the price. These workers were employed by the Airports Authority for many years on a temporary basis and at minimum wage, and they found themselves without an income or alternative work."

The Israel Railways responded as well. "The Israel Railways operated as part of the Ports and Trains Authority until 2003, and there was no prohibition in this framework on the employment of family members in government authorities. Since then Israel Railways has become a government company, and stricter regulations have been implemented on the issue of hiring family members. The Government Companies Authority regulations from 2005, which limit the hiring of family members, are fully implemented without exception."

The Ashdod Port company issued a response, saying that "the report refers to a period since the establishment of the port of Ashdod 41 years ago, and does not reflect the operations of the company that took effect following the ports reform in February 2005. Since that time, the company has scrupulously ensured that all workers are hired in a public, transparent and fair tender. Currently 34 percent of the port employees are have family members in the company. This figure cannot be changed at the wave of a hand. The company is taking steps to minimize this number over a period of years."

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