Finance Minister Yair Lapid’s new proposal to restrict executive pay could cause the opposite, Israel Securities Authority chairman Shmuel Hauser warned on Wednesday, reported Globes.
Lapid’s scheme involves an indirect cap on executive pay by limiting expenses recognized for tax purposes, relating to executive salaries at financial institutions and bodies that manage the public’s money.
The move would affect Israel’s leading banks, insurance companies and investment houses. In 2013, the pay of 46 executives in such companies exceeded the proposed NIS 3.5 million maximum.
Speaking at a press conference to mark the publication of the Security Authority’s annual report, Hauser came out against the idea. “For the good of the public, we should create a link between salary and performance. A uniform cap is problematic, because the Tel Aviv Stock Exchange (TASE) has companies of different sizes.”
Hauser added that it is premature to determine the results of Amendment 20 of the Companies Law. “At some companies, we see a drop in salaries, and I think that there is room for optimism. In my opinion, the amendment’s main purpose is to link salary to performance. An extremely high salary is a stain on the companies,” he said.
The plan would have negligible effect on executive payment outside the financial industry, where lavishly-paid CEOs in companies such as Israel Chemicals, Israel Corporation and HOT would remain untouched.
General reaction to the proposal has been lukewarm, at best. Supervisor of Banks David Zaken said that the proposal was “an appropriate step in the right direction, and can lead to changing norms in the salary level and structure.”
Hauser’s own salary cost was NIS 788,000 in 2013, and will be NIS 840,000 in 2014, according to the Securities Authority’s budget.