Expert: Limits on Bankers’ Salaries Likely to Backfire

A law to limit the salaries of top executives of companies in the financial sector is so radical that “it’s just a matter of time before it gets rolled back,” according to Zvi Spesak, chairman of the Meitav Dash investment house, one of the biggest in the country. Speaking at a financial conference in Herzliya, Spesak said that “we have seen time and time again how radical regulation is repelled in the other direction, with the reaction often more severe than the original issue.”

Finance Minister Moshe Kachlon last month proposed legislation that would limit the salaries of executives in the financial sector. The new legislation would limit senior managers of financial institutions, including banks and investment houses, to 35 times the salary of the least paid workers in the organization, or a limit of NIS 2.5 million annually.

Kachlon said that he opposed super-high salaries for top executives in Israeli companies. “I am on the warpath against the philosophy that says that it is winner take all and every man for himself,” Kachlon said at the press conference. “There is no reason why someone should earn 100 times the average salary. There are people who won’t go to work because they realize they have no chance to advance,” said Kachlon. “This has to stop.”

Zionist Camp MK Shelly Yechimovich praised the limitations and called for them to be expanded to other sectors of the economy, including public companies. The limitation of the salaries that is set to be proposed in the Knesset is “an important achievement,” Yechimovich said. “Hats off to Minister Kachlon for being the first Finance Minister to tackle this issue.”

But Spesak believed that not only would the legislation be rolled back from the financial sector – it would never be expanded to other areas, and in the end, senior finance industry figures would earn even more than they do now. “Life teaches us that the reaction is often more severe than the action,” he said. “That is the one positive thing I can say about this legislation.”