The Bottom Line / Paying Up, Big Time

Shlomo Nehama and Danny Dankner did not invent the system, they just took it to extraordinary heights of cynicism and chutzpah.

Shlomo Nehama and Danny Dankner did not invent the system, they just took it to extraordinary heights of cynicism and chutzpah. The Recanati family thought up the "ladder system" back in the 1990s, when they paid whopping salaries and generous stock options to the senior managers of the Clal concern, allowing the members of the family to "climb the ladder" they built, enjoying such exorbitant salaries themselves.

That's how Bank Hapoalim operates. The controlling shareholders hand out whopping salaries to the salaried managers (for example, CEO Zvi Ziv has wage costs of NIS 740,000 a month), so that Shlomo Nehama can take home his own illogical pay wage of NIS 750,000 a month, and Danny Dankner, as deputy chairman, NIS 540,000 a month. These are salaries that Nehama, Dankner and Ziv would not enjoy in a free market.

Instead of sharing profits equally to all shareholders through dividends, the controlling owners are giving themselves a bumper cut, through crazy salaries and a stock option plan that ensures additional millions. The public suffers. It holds 55 percent of Hapoalim's capital directly or through mutual and pension funds, but gets less than its share of the profits, because Shlomo Nehama and Danny Dankner have robbed the till.

There is a solution. The supervisor of banks should forbid controlling shareholders from holding offices at the bank. Clearly they have a misguided opinion when it comes to their own salaries, so maybe they could also jeopardize the bank's stability? Moreover, the income tax authority should not recognize such exorbitant wages as tax deductible. Any salary above NIS 40,000 a month to a controlling shareholder should not be recognized as a deductible expense. That would put a brake on the system.

Does NIS 40,000 sound low? Not really. I took this sum from Lev Leviev, owner and chairman of Africa Israel. Leviev makes do with a monthly salary of NIS 40,000, with the rest he gets as dividends. As he himself says, "a public company is a partner with the public, and the partnership should not be abused with salaries and perks. A publicly traded company is not a private cash cow." I couldn't put it better, Mr. Nehama.

Talking about salaries, two weeks ago I slammed Knesset Speaker Reuven Rivlin for not publishing details on Knesset workers' wages. Rivlin called, and said that he plans on releasing the details and would do so that very day.

Rivlin sent the media details on the 30 highest-paid workers at the Knesset, and the media lapped it up. But these details were only part of the story, and misleading. They referred only to the month of February, not an annual average, when there are plenty of bonuses in the public sector. Maybe in March they get paid bonuses for Pesach? And why doesn't the data include pay component for company cars? And why did he not publish wage costs, including pension expenses?

Rivlin ought to publish new, improved data according to the rules of the treasury's wages director. He surely wouldn't like to think that the Knesset wages department has pulled a fast one on him, and us.