The High Court has authorized as constitutional a law that will limit the salaries that executives in the banking, insurance and finance industries are allowed to earn. The new regulations will go into effect in 2017. However, the court ruled, past benefits based on salary, such as pension plans, will not be affected by the new rules, which will apply only to salaries.
The 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. Statistics indicate that 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.
The legislation, proposed by Likud MK Miki Zohar with the backing of Finance Minister Moshe Kachlon, was approved in March. In support of the legislation, 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.”
Banks, naturally, were very opposed to the legislation. Speaking to MKs before the legislation was approved, Tal Nadav, a representative of the Israel Banking Federation, said that the law was a “very extreme one that will encourage top personnel to leave the industry and move to other areas where there are no such limits, such as real estate.”
According to Zionist Camp MK Shelly Yechimovich, the most important feature of the legislation was the inclusion of low-paid contract workers in the computation of the salary limitation. “Hats off to Minister Kachlon for being the first Finance Minister to tackle this issue,” she said.