Top Israeli Policy Makers Blast Top Executives' Pay

Excessive salaries harm companies, investors and the entire market, say Shmuel Hauser and Manuel Trajtenberg.

Emil Salman

Two leading economic policy-making figures – Israel Securities Authority chairman Shmuel Hauser and Manuel Trajtenberg, who led the committee that designed an economic reform agenda after social justice protests three years ago – sharply attacked top executives for excessive salaries Monday.

Speaking at a conference of the Association of Public Companies Monday morning, Hauser called such high salaries “detached from reality” and especially troubling given the level of inequality in Israel. Hauser said he was troubled by salaries that are not conditional on performance over time. “It bothers me that executives take unreasonable salaries for themselves, without taking into account that in the end it harms the company, its investors and its reputation, and the entire market,” he said.

Hauser also criticized the association’s positions on the matter, saying constructive public debate on the issue would benefit the companies, their shareholders and the market.

The conference comes a week after shareholders approved a 6.3 million-shekel ($1.8 milion) annual compensation package for Eldad Fresher, CEO of Mizrahi Tefahot Bank. The vote came in defiance of proposed rules that would cap tax deductibility for financial institutions that award salaries and other compensation exceeding 3.5 million shekels a year.

Trajtenberg, who now heads the Council for Higher Education’s Planning and Budget Committee, called excessive salaries at the top of the income scale, as well as those at the bottom, both instances of market failure. He attributed that to the monopoly position of many companies and poor management.

“Common sense does not accept salaries of tens of millions per person,” he said. “It has no economic justification, without mentioning ethical justification.”

He warned that inequality could cast doubt among Israelis about the fairness of the economy and the country generally. But, addressing the issue of the 3.5 million-shekel tax-recognition ceiling, Trajtenberg warned against such pointed government intervention, saying that in the end it would fail to achieve its purpose.