The Bottom Line - Setting the Price for Privatization

Riki Bachar, chair of Israel Discount Bank's workers' committee, charged Matthew Bronfman a pretty penny to agree not to disrupt sale of the bank's controlling stake.

Riki Bachar, chair of Israel Discount Bank's workers' committee, charged Matthew Bronfman a pretty penny to agree not to disrupt sale of the bank's controlling stake. However, this week may demonstrate that the final word regarding the price tag for privatization or structural change has yet to be uttered.

From the onset of negotiations, Bachar insisted on rejecting M.I. Holdings'(State of Israel Properties) compensation offer to Discount Bank employees to clear their approval of the privatization deal. Workers were to receive 10 percent of bank shares at a 25 percent discount, while receiving loans from the bank with easy repayment terms. The offer was the same that Bank Hapoalim employees received when their bank was privatized in 1997, and the same privatization deal offered to United Mizrahi Bank and Bank Tefahot workers in 1994 as well as Union Bank workers in 1993.

Bachar decided to forgo the shares and applied pressure to receive immediate financial compensation. He agreed to a NIS 250 million package for employees at Discount Bank and its subsidiary, Mercantile Discount Bank, equivalent to 4.5 months' salary per worker. The state and bank promised in addition not to alter the existing labor agreement, which includes wage rights and employment status, for five years.

An additional clause, deemed "crafty" by negotiation participants, conditions the sale of Discount's particularly lucrative branch in New York, on agreement by the committee. It is a safe bet that when that day comes, the workers' committee will condition its agreement on another generous compensation package. Bachar obtained these perks along with workers' legal counsel Beni Cohen, without needing to resort to a drawn-out strike. It was enough to throw in a few slowdowns that caused minimal damage.

However, the great government giveaway at the ports still lies ahead. Barring any last-minute change, negotiations will conclude in the next three days between Finance Ministry representatives, workers committees at Haifa, Ashdod and Eilat ports, and Histadrut labor federation representatives, ahead of implementation of port reforms set for Thursday.

Along with the structural change initiated by the treasury to dismantle the Ports Authority into separate government companies, every port worker has already been promised a NIS 50,000 bonus, and that figure is far from final. In contrast, Israel Railways workers received bonuses of "only" NIS 38,000, when the treasury removed it from the Ports Authority and turned it into a government company.

In addition, the port workers agreement will guarantee protection to veteran workers from layoffs, as well as grade promotions to all workers in 2008. Employees who retire will receive a retirement grade promotion, providing them with a larger base for calculating their pension payments.

Bachar's Discount deal influenced port workers to raise the price tag. Political instability also played into their hands, as Labor's entry into the government weakened the position of Finance Minister Benjamin Netanyahu opposite port workers.

However, the port workers' true benefactor was revealed this week to be no less than Prime Minister Ariel Sharon. "It is important to enact port reform in consensus with the workers," he said. Sharon thus signaled to the workers, just days before implementing reforms, that the NIS 50,000 bonus was not final. Sharon put the wind at their backs, seeing no reason not to apply further pressure to increase the final compensation figure.