To Have and Have More: Discount Bank Employees Press on With Orgy of Pay Hikes

With the public clamoring for greater competition and lower prices in banking, well-compensated Israel Discount Bank employees shuttered their branches Thursday to attend a rally to protect their automatic pay raises.

Israel Discount Bank customers arrived at their local branches Thursday to find they had been closed without notice. The reason: union demands, backed by the Histadrut labor federation, for the continuation of the automatic pay raises employees of the bank have become accustomed to over the decades. The 5.8% salary hikes, which bank employees have received annually for 40 years, have left the bank with an average salary cost of NIS 29,000 per month.

The battle being waged by Discount Bank employees illustrates how out of touch banking-system personnel are with Israel's labor situation. Bank clerks making NIS 30,000, NIS 40,000 or NIS 50,000 per month with complete job security, an extra month's salary, bonuses, vacations abroad and higher-education tuition for them and their children, feel they need the protective shield of their workers' committee and the Histadrut.

But why? The bank agrees that employees will continue to receive all their traditional perks under the new collective wage agreement. But it is suggesting that from now on, the raises be only given to those earning up to NIS 18,000 per month. The workers' committee and the Histadrut insist that raises continue going to those making tens of thousands more.

This is one of the most groundless strike threats the banking system has ever seen. Unsurprisingly, the Histadrut is supporting the well-fed bank employees in a battle being waged on the backs and at the expense of Discount Bank customers and the public's pension funds, which own about 75% of the bank's stock.

A collision course with public opinion

On Thursday morning, some 4,000 Discount Bank employees deserted their branches. Leaving their clients in the lurch, they boarded dozens of buses provided by workers' committee chairman Ricky Bachar and went to a hastily-arranged rally at Tel Aviv's exhibition grounds.

At the rally, Bachar declared that the committee under his leadership is headed for battle. Employees in attendance showered the committee chairman with accolades and greeted his speech with thunderous applause. He went on to threaten the bank with a general strike, telling the workers: "You are handing me the power to turn to management and tell them, 'Kiss my ass.'"

The workers cheering for Bachar seemed to genuinely feel their struggle is justified. They apparently never stopped to think that they're already enjoying the most generous pay conditions in the economy save for those at the ports and the Israel Electric Corporation.

It seems the workers' committee also ignored the question of whether customers should be left without service so raises can be arranged for bank employees making upwards of NIS 30,000 a month.

Discount Bank employees embarked on their battle just days before Sunday’s Knesset's Economic Affairs Committee meeting to discuss implementing the recommendations of the Zaken Committee report on fostering competition in the banking sector. Their demand that the orgy of pay hikes continue is on a collision course with public demand for competition between banks and reduced bank-services costs.

Public outrage against the high fees and interest rates charged to pay for the bloated salaries and benefits of bank employees is mounting. Boosting competition in the banking system will wipe out the banks' ability to continue granting workers the exceptional pay conditions they've gotten used to in recent decades.

All for none, and none for all

The collective wage agreements at Discount Bank, First International Bank of Israel (Beinleumi) and Union Bank of Israel are linked to the generous one enjoyed by Bank Leumi employees. The similarity in the wage agreements of four of the largest six banks ensures that that they have similar cost structures, meaning a low level of competition, since none of the banks can suddenly come up with a considerably different pricing policy.

Up to this point, Israel’s antitrust commissioner and banks' supervisor haven't seen fit to intervene and delink banks’ the wage agreements.

Bank Hapoalim and Mizrahi Tefahot Bank are the only two banks with completely separate collective agreements with bank personnel. These agreements have allowed the banks more flexibility in running their operations. It's probably not coincidental that they are the two best performers in the industry, even though average compensation costs are NIS 29,000 per month at Bank Hapoalim and NIS 23,500 per month at Mizrahi Tefahot Bank. Notably, under a recently signed wage agreement at Hapoalim, it was agreed that only junior staff will be given substantial pay hikes given that the pay levels of senior-ranking employees are exceptionally high.

The battle now being waged by Discount Bank employees is actually a trial balloon meant to set the stage for the workers' committees at the other banks. Hanoch Livneh, chairman of the Beinleumi workers' committee, recently declared a labor dispute and so as early as Thursday, will be able to call a strike if Beinleumi's management doesn't accept his demands.

Part of what the Discount Bank workers fear is the imminent threat of layoffs. This threat, which Bachar has referred to lately and which has helped him gain support in the pay-hike battle, has left bank personnel in a state of uncertainty.

At the rally, Bachar told the assembled workers, "A very senior-level official at the bank asked me to fire 500 employees. It's lucky I didn't have anything in my hand at the time, because I would have let him have it over the head. In this committee, as long as I live, not one worker will be fired, not even if management envies layoffs at Bank Hapoalim and Bank Leumi. It won't be an easy struggle, because in my opinion, if management doesn't succeed in bringing about layoffs and lowered wage they'll be sent home. And I'm telling you, they'll be sent home. We're lucky to have the Histadrut at our side. We've created something here that doesn't exist in too many workplaces."

Discount Bank officials deny layoffs are on the agenda at all, saying, "Ricky Bachar's speeches are cut off from reality.” Whether the issue of layoffs was raised by the chairman of the bank or the chairman of its workers' committee, the possibility that was introduced as a negotiating ploy can't be ruled out.

Bank sources say 250 employees are expected to reach retirement age by 2017 and another 190 on average annually from that year on. They claim management isn't interested in encouraging early retirement, since this would involve higher severance pay.

A wage apart

As Discount Bank employees’ began their battle, the bank’s former chairman was winning one of his own. Arie Mientkavich, who left the bank seven years ago, was informed last week that he'll receive an additional NIS 9.7 million in severance on top of what he was paid when he left in January 2006. An arbitrator made a ruling on the payment in his favor.

The bank’s previous board – headed by Mientkavich himself – promised to grant its chairman NIS 17 million in severance pay if the state sold control of the bank. But shareholders didn’t approve of this arrangement at the time, and when, soon thereafter, the Bronfman and Schron families acquired control of the bank from the state, they refused to give Mientkavich the inflated amount he had arranged for himself.

Mientkavich's severance compensation is equivalent to the aggregate amount given to the bank's current chairman, CEO and several top members of management together. In 2012, compensation costs for the six top earning members of Discount Bank management totaled NIS 12.7 million. This includes NIS 3.1 million for bank chairman Yossi Bachar and NIS 3.9 million for CEO Reuven Spiegel. The chairman, CEO and management forfeited their bonuses last year, explaining the move as "in furtherance of and keeping with the saving and streamlining steps taken by the bank and attention towards current public attitudes."

Ofer Vaknin