When It Comes to Scandal, the Big Money Is at Issue With Social Affairs Minister Haim Katz

Katz built his power base as union head at Israel Aerospace Industries, and there are questions about his ability to intervene at the government company.

Haim Katz
Olivier Fitoussi

Knesset member Oren Hazan creates a lot of headlines. A report issued last week by State Comptroller Joseph Shapira also accuses him of possible criminal offenses, saying that the MK had made a false declaration stating that he had not received contributions for his Likud party’s internal election campaign. It’s hard to know how that case will end, but it wouldn’t be outlandish to think that Hazan’s tenure in the Knesset would be rather limited.

His election to the Knesset was a mishap of the kind that happens frequently, but Hazan’s conduct is really unimportant to the overall scheme of things in the Knesset or to the country’s economic or social structure. Since the government has the thinnest of majorities in parliament, Hazan carries weight, but his individual imprint is nil and he will disappear from the scene empty-handed.

There are other Knesset members whose presence is more important, but also raises questions regarding democracy and power and influence. And those members of parliament are not about to disappear. On the contrary – they are accumulating more power through problematic means.

One of them also stars in the comptroller’s report, and not for the first time. And he’s not just a rank-and-file Knesset member either, but rather the minister of social affairs, Haim Katz. His presence in the Knesset and the cabinet is not just some idle curiosity.

Katz is an experienced Knesset member with vast knowledge when it comes to pensions, labor and social welfare. He knows how to forge alliances with other Knesset members to advance social causes close to his heart. That makes him a legitimate member of parliament and cabinet minister – but how he has been amassing power and influence appears to be less legitimate.

For many years, Katz served as secretary of the workers’ committee at Israel Aerospace Industries, a government company that employs a labor force of about 15,000. He became the strongest person there. Many IAI employees were enlisted to his campaign to gain a high-ranking spot in the Likud party’s slate for the Knesset election.

Recruiting employees

Despite the legal ban on using the facilities and resources of government corporations for political activity, IAI employees were seen coming to the Likud party polling stations in company cars, the comptroller’s report says. Their arrival was rather organized, with groups of five to 10 workers showing up one after another. The comptroller’s office spoke to some of them and concluded that the arrangements to enable them to vote was coordinated.

The report also notes that on the day of the Likud party primary, IAI employees were given vacation time and many were given excused absences for part of the work day beyond what would prevail on a regular work day. The report says 4,032 employees were absent for more than a half hour. In addition, 1,010 took vacation compared to about 670 on an ordinary day.

The bottom line is clear. The recruitment of IAI’s employees and company resources played a major role in Katz’s appointment as social affairs minister following the March Knesset election. His power over the years has enabled Katz to forge alliances and cut deals that have made him one of Likud’s strongest figures.

In response to the comptroller’s allegations, Katz said: “There is absolutely no basis or justification for attributing the organization of transportation, if such a thing occurred at all, to me. The fact that I served as head of the [workers’] committee at the time certainly does not mean that this can be attributed to me. My high-quality, wide-ranging parliamentary and public activities over the years are what would lead a wise voter to give me his vote.”

The question of whether the comptroller’s allegations will fade away or provide the basis for an investigation will become clearer over time. Katz had been questioned in the past by the police over suspicions that he used company resources, but the attorney general at the time, Menachem Mazuz, decided to close the case due to legal obstacles that it presented.

Even before the question of whether to open an investigation into the more recent allegations is decided, another issue may surface that reflects the problematic way in which Katz was elected. IAI is currently planning on implementing cuts that will include the layoffs of hundreds and even up to 1,000 employees. The cuts follow a sharp drop in profits at the company, which reported a $9 million loss for the first nine months of the year and a 7% drop in sales, to $2.66 billion.

Results like those, despite such major sales turnover, require major efficiency measures, and management is planning steps that include wage and benefit cuts to high-income employees, elimination of administrative positions and, as noted, other major layoffs.

Golden parachutes

As has been customary at government companies and at IAI in particular, employees are not sent packing just like that. They’re preparing severance pay beyond what has accumulated in severance funds of an average of around a million shekels ($250,000) per employee. That’s a perk that very few people in the Israeli job market could get, but employees at government corporations, banks and career army personnel and very senior corporate executives can benefit from such golden parachutes.

From preliminary conversations that have begun between management and employees at IAI, it appears that the employees are not willing to accept such an arrangement. They want more severance pay and fewer layoffs. That’s legitimate, but it’s not just a matter between employer and employee, but rather a public issue since IAI is a government company.

It’s management’s role is to negotiate agreements with the employees. From the standpoint of the public, it’s clear that any exceptional severance package would constitute a precedent for other government corporations and raise the bar. So the government should also have a say on any agreement reached. And we should remember that these are not poorly paid workers but rather people earning relatively high wages.

Katz played a decisive role in the high salaries and bloated benefits at IAI. He was there over all those years. He represented the workers. He took care of them and they rewarded him by playing an important role in his election as a Knesset member and his selection as a cabinet minister.

His transition to politics appears on the surface to have left the company without him, allowing management to shake IAI out of its inefficient operating model, but Katz still casts a giant shadow and it will be a corrupt step on his part if he takes advantage of that influence directly or indirectly, through others.

IAI has carried out streamlining on several occasions in the past, and as head of the workers’ committee, Katz always played a central role with them. Now, however, he is no longer an IAI employee. He’s social affairs minister and his name was even mentioned as a potential economy minister. His absence from IAI doesn’t mean that he doesn’t have major interests there. He has relatives and many friends who work there.

And he has something else. He is a member of the Israeli cabinet and of the governing coalition with its bare majority in the Knesset. He therefore has power and influence over government conduct and the capacity to interfere, scuttle or place obstacles in the way of any efficiency measures at IAI. After all, the employees elected him to the Knesset and got him where he is today. They are his friends and associates, his flesh and blood.

The direct links that Katz has to IAI and most importantly the manner in which the state comptroller described his election to the Knesset should disqualify him from intervening in or influencing what happens at the company, even behind the scenes, as is happening now. There is a lot of nepotism and inefficiency at government corporations, along with problematic labor agreements and foul norms. Katz’s interference at IAI would only make worse the bad reputation that this aspect of the work of government corporations has.

The ministers who are relevant in dealing with IAI are the finance and defense ministers, who should see to it that Katz, as social affairs minister and a potential economy minister, doesn’t also serve in practice as IAI minister on his own behalf.