18 Families, and Lots of Clerks

Nir Gilad, the former accountant-general at the Finance Ministry, is in advanced negotiations for a high position ? deputy CEO of Sammy and Idan Ofer's gigantic company, The Israel Corporation (TASE: ILCO). Gilad is also the man who in 2002, led the state to agree to buy the Ofers' 26% interest in Oil Refineries.

Ohad Marani, the former director-general of the Finance Ministry, is expected to lead a team being consolidated by insurer Shlomo Eliagy. The group wants to buy the controlling interest in Bank Leumi (TASE: LUMI). Four years ago, Marani led the team that set rules for the acquisition of controlling interests in banks. The most relevant bank, for the purposes of the Marani committee, was Leumi.

Did the Ofers promise Nir Gilad a job while the negotiations were going on? Did Marani get a wink-wink from Bank Leumi? Of course not. But one doesn't need evidence of such promises to be very uncomfortable about the pattern.

A few years ago one of Israel's bigger businessmen, with holdings in communications, told one of his managers to hire a man who's just left the Communications Ministry, and to give him a management job. Said manager was taken aback: "What do we need him for?" he protested. "He hasn't done a thing for us, and he's useless, too. Did you promise him something?"

That wasn't the issue, the businessman explained. What mattered was that Communications Ministry bureaucrats knew that when they wanted to move on, this company would be happy to hire them.

A few years ago we overheard a conversation between two top bureaucrats over at Communications. Those were the days of the financial crisis, Israel's bond market was crashing and the two were en route to a presentation that the Finance Ministry was holding for analysts of the rating agencies, about Israel's economic situation.

Their conversation was long and emotionally charged. They argued loudly and fiercely about a burning issue: pay levels at the Bank Hapoalim executive.

Anecdote? Maybe. But if you rub shoulders a lot with the top officialdom in Jerusalem, you get the feeling that they constantly have an eye on their next job.

Worse, in recent years there's been an underground race between the top officials to see who gets the cushiest job the quickest. The exposes regarding the sky-high pay at the banks, insurance companies and big concerns whetted their appetites, their imaginations, and a few other things as well.

Reams have been written about the so-called "18 families" that control Israel's economy. In this paper we have often tried to differentiate between the propaganda and the economic reality of these families. Mainly, we have tried to point out that 20 years ago, the economy was controlled not by 18 but by three families, two banks, one government and one union.

The success in business and prosperity of these families is not grounds for worry. That is a direct result of Israel's economic growth, of the development of the capital market, and of its exposure to the great world out there.

Success is not a crime

What is worrisome, is the growing ability of five or ten tycoons to influence government, and we don't necessarily mean the political echelon. We mean bureaucrats and regulators.

Government is brimming with good people with a true sense of their public mission. But we believe that there is a growing group of civil servants secretly racing for high-ranking jobs with gigantic salaries.

Why is big business so hot for these top clerks? They are very talented and accrued valuable experience in government, the tycoons would say.

Sounds good, but that is not the story. Most of these bureaucrats shifting from public service to private companies are going to sectors or companies they had supervised. They are winding up in areas that are hugely impacted year before government decisions.

Some businessmen view recruiting ex-officials as a way to advance their interests in government.

Rules ordering government clerks to cool off for months or a year before assuming private office can't help. This is a small country where everybody knows everybody. Bread scattered upon the waters doesn't have to come home that fast, or even in two or three years: its message will remain for a long time to come.

Clerks who refuse to grovel before big business find themselves reviled not only in the business sector but in the public one as well. Steal horses with the gang or be labeled a hopeless, obsessive dork, bordering on the dotty.

Lately there has been more and more chatter about the 18 families. it is time to divert some of that attention from the families to the bureaucrats, and on how to ensure that professionals in government be independent, and proud of their work for the greater good of the public.

It is time for the Families-haters to understand, that the problem is not their prosperity. It is not the people who want to do well. It is with the people responsible for the public's assets, who have their minds not on the here and now, but on the tomorrow.