Finance Minister Moshe Kahlon on Tuesday asked the Knesset Finance Committee to approve a law that would cap salaries for top financial-service executives at 2.5 million shekels ($640,000 ) a year, calling excessive pay “a moral and ethical failure of the first order.”
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“Why are top executives in the financial services sector worth more the [air force] squadron commanders, combat brigade officers, judges and justices, heart and brain surgeons, pharmaceutical, space, chemists and physicists?” Kahlon said in a letter to committee chairman Moshe Gafni (United Torah Judaism). “How can we justify pay so divorced from reality?”
The legislation, which would encompass banking and insurance executives, was due to be taken up already Wednesday by the committee, where it is has broad support from both coalition and opposition lawmakers. Kahlon consulted with Gafni before presenting the draft law and has his support.
Under the legislation, compensation for financial service executives exceeding 2.5 million shekels a year would not be deductible by the employer for tax purposes.
The proposal is similar to a law proposed by Kahlon’s predecessor, Yair Lapid, but lowers the cap from Lapid’s 3.5 million shekels. The earlier legislation was approved by the finance committee in the previous Knesset and passed the first of three votes in the full Knesset needed to become law, but shortly afterward elections were called and the process was cut short.
Over the past year, Kahlon has stressed that he planned to lower the ceiling to 3 million shekels and last week said he planned to lower it further still. The pay cap was part of the party platform of his Kulanu faction, which captured 12 seats in last year’s elections on a promise to reduce the cost of living and address Israel’s yawning income gaps.
Kulanu is vying for many of the same votes as Lapid’s Yesh Atid and a hint of the competition surfaced in Kahlon’s letter Tuesday. “I want to clarify that the position of the previous finance minister to limit executives to 3.5 million shekels a year is unacceptable to me,” Kahlon said.
Kahlon, in his letter to Gafni, called rising pay packages in financial services a signal case of the growing gaps in income in Israel. He said packages that now reach as high as 8 million shekels annually amount to 100 times the average wage nationwide.