Turning Government Officials Into Millionaires

They spent years in various government ministries and wasted thousands of hours in meetings drinking coffee out of foam cups. They were anonymous officials who the public had never heard of - but important businessmen knew them well. They were provided the opportunity at a very young age to manage the state's coffers, to move billions around and to make decisions that affect every one of us. And then they left and turned into millionaires - in dollars.

Nir Gilad, the former accountant general at the treasury, has been given the chance to manage the Israel Corporation by the Ofer brothers, and with it options worth NIS 14 million. Uzi Yamin, a former treasury official, holds shares worth $66 million in Delek U.S.A., courtesy of Yitzhak Tshuva. Avshalom Felber, another former treasury official who now also works for Tshuva, is likely to make NIS 100 million if the desalination company he manages goes public.

And there are many more like them.

We were reminded of them in the wake of the new wage agreement for the Bank of Israel reached last week. After years of battles between the finance ministry and the central bank, there finally seems to be a compromise taking shape that will allow dozens of managers at the bank to enjoy salaries of up to NIS 35,000 a month - more than that of a director general in the public sector. But the Bank of Israel is also part of the public sector, and the question is: Why should it be allowed to exceed the accepted public sector norm?

The explanation from Bank of Israel Governor Stanley Fischer is that all over the world it is accepted that central bankers make more than other public sector employees.

Another explanation is that the central bank is in competition with the financial sector over recruiting the best employees, and salary levels are much higher in the private financial sector.

Fischer is worried. He has identified a trend of the best workers leaving the bank in the past few months, in particular from the banking supervision department.

The reason is the rising capital markets. If you have not been paying attention, then you should know that Israeli capital markets are hot. Not only are yields high, but so is the competition for employees as well as investment in marketing and advertising. Salaries in the financial sector have skyrocketed over the past year. Investment managers and advisors are now getting compensation conditions they could only have dreamt about before, and the feeling reminds people of what happened in the high-tech industry five or six years ago.

Fischer thinks that treasury employees are different than those at the Bank of Israel. Treasury officials retire and go to work in the private sector, but in Fischer's opinion, that is a bad thing for the central bank. The bank needs professionals for the long-term. Will NIS 3,000 a month more for senior Bank of Israel managers compared to what ministry director generals get paid make the difference? It is hard to believe. If there are temptations in the business sector of the type that turned many former government officials into millionaires, a difference of a few thousand shekels a month will not bridge the gap.

What it will do, however, is perpetuate the situation where Bank of Israel employees make more and get better benefits than employees of the treasury. And in spite of this, the parking lot of the central bank empties out at four in the afternoon, while on the other side of the road at the finance ministry, it is still hard to find a parking place at that hour.