Finance Minister Accuses Netanyahu of Trying to Block Pay Cap Law

Send in e-mailSend in e-mail
Send in e-mailSend in e-mail
Benjamin Netanyahu and Moshe Kahlon at the Knesset.Credit: Emil Salman

Finance Minister Moshe Kahlon lashed out Tuesday against what he said were attempts by Prime Minister Benjamin Netanyahu to block his plans to cap salaries for top executives in the financial-services industry.

“I take it as a serious matter the attempts by the prime minster, through the director general of his office, to thwart the decision of the Knesset Finance Committee last week to limit pay for senior executives in the financial sector,” Kahlon said at a conference of the financial daily Calcalist.

His remarks came shortly after a report that Eli Groner, the director general of the Prime Minister’s Office, had said he was looking for ways to block the pay cap, presumably at Netanyahu’s behest. However, in a conversation with TheMarker later in the day, Groner said he had simply been asking lawmakers about the terms of the legislation.

The controversy comes days after the Finance Committee voted unanimously to limit compensation in publicly traded financial service companies to 2.5 million shekels ($650,000) a year. The legislation, which still needs to clear the full Knesset, doesn’t cap salaries per se but bars companies from deducting salary costs above that amount as an expense.

Kahlon had made the salary caps a key part of his 2015 campaign, when his Kulanu Party captured 12 Knesset seats, vaulting him into the finance portfolio. In fact, the legislation had originally been initiated by his predecessor, Yair Lapid, but Kahlon lowered the ceiling from 3.5 million shekels and MKs added another provision limiting top pay to 35 times the lowest pay at any given company.

Sources said the prime minister was unhappy with the draft law as it is now phrased, but said he is unlikely to fight Kahlon because the issue is so politically sensitive. With the coalition controlling just 61 seats in the 120-member Knesset, Netanyahu has been careful not to pick fights with his partners.

Netanyahu supported Lapid’s 3.5-million cap, but in principle he is opposed to the government’s intervening in issues like pay in the private sector, fearing it will deter the best candidates from seeking jobs in financial services, deter foreign investment and may even encourage some Israeli companies to move abroad.

At the Calcalist conference, at least one source in the industry, who asked not to be named, discounted those threats. “If they were to hold a real competition for the job of senior executive at a financial services company under the terms of the new law – 2.5 million shekels a year, 200,000 shekels a month, a long line would form,” he said.

However, Netanyahu is said to be firmly opposed to expanding the law and moreover is concerned about a possible alliance between Kahlon and Shelly Yacimovich, the Zionist Union lawmaker and standard-bearer of its economic left wing.

During last week’s Finance Committee hearings, Kahlon and Yacimovich exchanged warm words and observers said they detected signs of an emerging partnership. Yacimovich and Zehava Galon, the Meretz chairwoman, plan to introduce a law that would extend the salary cap to all publicly traded companies.

Meanwhile, Kahlon faces opposition in the treasury bureaucracy for the cap. Amir Levy, the budgets director, asked pointed questions about the legislation at a meeting of top ministry officials this week, and Dorit Salinger, director of the treasury’s Capital Market, Insurance and Savings Division, disapproves of the second cap of 35 times the lowest salary, while Chief Economist Yoel Naveh is similarly critical.