Ministerial Panel Gives Nod to Cap on Executive Pay in Finance Sector

Annual wages above $1 million would lose tax deductions under bill proposed by Finance Minister Yair Lapid.

Olivier Fitoussi

The Ministerial Committee for Legislation approved on Sunday a bill designed to rein in executive salaries in the finance sector. The draft law, introduced by Finance Minister Yair Lapid, prohibits deductions for annual compensation in the field, including bonuses, in excess of 3.5 million shekels (about $1 million).

The bill now goes to the Knesset for approval.

The draft includes a detailed mechanism for approving annual wages above the 3.5-million-shekel mark, in order to reduce possible conflict of interest. Salary exceptions would have to be approved by the board of directors, including a majority of external members, as well as a general shareholders’ assembly. For publicly held financial institutions, a majority of the minority shareholders would also need to approve the decision.

The bill also requires firms to report any compensation packages topping 3.5 million shekels a year.

“The bill will rein in and reduce salaries at financial institutions that manage the public’s money. This is an important step in a process that we’ve been leading of reducing salary gaps,” Lapid said.

Earlier this month, Finance Ministry Accountant General Michal Abadi-Boiangiu called Bank Leumi CEO Rakefet Russak-Aminoach to advise her and Leumi chairman David Brodet to comply with the draft law. For Russak-Aminoach, that would mean taking a 50% cut in salary.