Last-second Largesse: Gov't Cos Chief Proposes Raise for CEOs. Forget It, Says Wages Director

Eyal Gabbai's stepping down, but first thinks he should hike their pay to a max of about NIS 60,000 a month.

The outgoing head of the Government Companies Authority (GCA), Eyal Gabbay, proposes to significantly raise the salaries of the chief executives of state-owned companies. But he may face fatal opposition in his last-second gesture, in the form of the treasury's wages director, Eli Cohen.

Gabbay recommends that the CEOs of the largest government firms be increased from about NIS 40,000 a month to between NIS 55,000 and NIS 60,000.

He also proposes examining raises for CEOs of smaller government firms, who earn about NIS 35,000 a month now.

Gabbay's proposal has the treasury's wages director, Eli Cohen, up in arms. Cohen  stated on Sunday morning that he firmly opposes any proposal to institute a blanket raise for the executive echelon at government companies. Even if an official motion is tabled, Cohen said, he will ignore it.

The proposal by Gabbay, who has announced he is leaving his post on May 27, 2007, applies mostly to the leading state-owned companies such as Israel Electric Corporation (IEC), water company Mekorot, Israel Aircraft Industries, Israel Railways, Israel Military Industries and the ports.

The proposed raises are intended to allow the state to attract serious candidates from the private sector to manage such large firms, in light of the large increases in salaries enjoyed by senior executives in Israeli business in recent years.

Gabbay feels that many good managers are not willing to manage government corporations today for the relatively low salaries offered, and therefore the state has no choice but to increase such salaries. He feels that the additional salary costs will pay for themselves if the improved level of management leads to better results at the state-owned firms. Gabbay also considers NIS 60,000 to be relatively modest in terms of today's business environment.

Gabbay's proposed raises apply only to CEOs, and not other executives at lower management levels such as vice presidents, or the chairmen either. The idea is to prevent an upward creep of wages at the firms - as well as to temper public criticism of the step because it will further increase the inequality of wages in the public sector.

The salary scales at government companies is the responsibility of the GCA in conjunction with the treasury's wages director. They do not require the approval of the Knesset or the cabinet. The proposal has been made by Gabbay to the wages director, Eli Cohen. Cohen has told TheMarker that it has yet to be studied in depth. He is leaning against updating the CEOs salaries in general, but he is willing to leave open the possibility of raising salaries in specific cases.

This could mean that if the name of a specific, outstanding candidate for a certain post is brought up - and if it is obvious that the candidate will not accept the post if the salary is not raised - then he will allow flexibility in raising the salary. This can be done without raising all other CEOs' wages, but Cohen emphasized that he still has not decided on the matter.

The CEO of Israel Railways earns a gross salary of NIS 42,500 a month, the chief executive of the IEC makes NIS 34,300 a month, the CEO of Israel Military Industries takes in NIS 35,700 a month, and the CEO of Mekorot rounds out the list at NIS 35,200 a month.