Banks Turn to Court to Fight Salary Caps

Attorneys for Israel’s banks have filed a petition with the High Court against a law that would limit the salaries of top executives in banks and financial institutions. The petition was filed, the attorneys were quoted by Calcalist as saying, after all attempts to reach a compromise failed.

The new legislation will 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. The legislation will be proposed by Likud MK Miki Zohar with the backing of Finance Minister Moshe Kachlon, who came to an agreement on the deal with Knesset Finance Committee chairman MK Rabbi Moshe Gafni. Under the deal, the Committee will approve the legislation, and put it on a fast track to adoption.

Statistics indicate that salaries of many of the top executives in the financial system are as much as 100 times greater than their lowest-paid workers. Payments above the 35x limit will be subject to heavy taxes, the legislation states.

Kachlon, Rabbi Gafni, Zohar and Bank of Israel chairperson Karnit Flug are all named in the petition as attempting to cloud the issue and set specific rules on how pensions and previous accrued benefits will be handled. In addition, the petition claims that the law is a violation of basic laws on freedom to earn an income and interferes with three fundamentals of the banking system.

According to Calaclist, Yair Seroussi, chairperson of the Bankers Union, used his influence to prevent filing of the petition numerous times, and reached out to politicians to clarify some of the outstanding matters, his office said.

Kachlon has 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. 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.”