MK Pushing Bill to Cap Executive Pay at Public Firms

Executive wages are one of the perks, or ills, of capitalism, depending on who you ask.

Executive wages are one of the perks, or ills, of capitalism, depending on who you ask. In Israel the issue of social gaps between the richest and poorest is constantly on the agenda, as are ways of narrowing these discrepancies. And one of the places where the gaps become glaring, at times, is the capital market, where top-level salaries can run at millions of shekels a year, while the rank and file workers may have to settle for minimum wage.

Knesset member Shelly Yechimovich is one who thinks this is all wrong. She proposes to slap a cap on executive wages at Israel's publicly-listed companies: top executives would not be able to gross more than 50 times the salary of their lowest-paid worker, she proposes in a new legislative proposal that she submitted to Knesset.

Yachimovich, who belongs to the Labor Party, evidently struck a nerve in the House. Her bill passed its its preliminary reading in the Knesset plenum yesterday.

Yachimovich, formerly a journalist, explains that her bill assumes the lowest salary in a company to be minimum wage. That means her bill limits top wages at the Tel Aviv-listed companies to NIS 200,000 a month, in gross terms. She estimates that the bill will affect the salaries of the 200 most lavishly paid executives in Israel.

It is true that her proposal preserves an enormous difference between the lowest and highest wage earners. But objections can be expected from the top wage earners, Yachimovich said.

"These wage discrepancies. still seem unreasonable, but this proposal is an attempt to place achievable limitations, in the conditions prevailing today," she added.

"Executive wages have spiraled in recent years, particularly in companies traded on the stock exchange. While these amounts constitute a way around dividend payments, and have a detrimental affect on investor profits (pension funds, provident funds, and so forth), they have also become a separate salary track which has no relation to that prevailing within the very same company," Yachimovich said.

She added that while people are seeing salary cuts and widespread hiring of particularly low-wage employees, managers are drawing pay that can reach up to millions of shekels monthly.

The bill was approved in a vote of 29 to two.