Viewpoint / Provocative Wages

The wages of CEOs, especially at the banks, remains headline news. Reports that Gazit Globe's (TASE: GLOB) Chaim Katzman was paid NIS 15 million in 2003, and that bank managers are getting NIS 300,000 a month, whips the public into a frenzy.

As for the managers of the publicly listed firms, and veteran investors, the media storm rankles. It brings back anachronistic memories of the years when Israel was semi-socialist. Capitalism calls for rewarding performance, and a manager who led his company to better results should be done well by. Very well by, at that.

Capitalism has its points but seems to leave the public clammy. Perhaps capitalist dogma needs to be explained more clearly, and perhaps Israel's public needs reeducation, though it would take generations for the lessons to take root in society.

In any case, the lavish remuneration of top management is provoking deep antagonism that cannot be ignored.

The managers can always shrug it off, saying the public has it wrong, that the people are being petty and populist, and that in modern society there is no place to complain about managerial compensation. That is, in fact, what the managers have been doing, so far. But they might be wise to lift their heads out of the sand, given the intensity of the resentment.

A social rift is one of the negative results of public opposition. Responsibility for the texture of Israel's social fabric does not belong solely to the corporate leaders, but they are citizens of the same country, and it could unsettle them, too.

Moreover, there are grounds for the claim that huge wage gaps could undermine the relevant organization's efficiency. When a Super-Sol (TASE: SAE ) cashier makes the minimum wage of NIS 4,000 a month while the CEO, Effie Rosenhaus, takes home NIS 166,000 a month, and when bank managers make 50 times what the tellers do, one has to wonder about motivation at the enterprise, and how loyal the underlings feel.

The cashier can always aspire to climb up the corporate ladder, say proponents of pure capitalism, justifying wage chasms. But we may assume that instead of loyally developing ambition, the teller is merely harboring alienation and frustration.

There is a solution to bridge the concepts, by linking managerial and lower-ranking wages. One could determine that options be a integral part of remuneration, for all workers of all ranks. There are other ways to tie one rank's salary to another's. Managerial pay could not climb beyond a certain pre-set ceiling, and if the alpha dog gets a raise, so do all the other animals.

Capitalists mock that idea, saying talent will merely jump to other companies offering more. They may be right, or one could suggest that a workplace consists of more than a paycheck. It is an environment. A working environment that shows consideration, fairness, job security and caring could prove attractive enough to compensate for a few percent more somewhere else.