MK Yechimovich: Don’t Tell Us How to Run A Company
Written by: Aaron Katsman | November 6, 2007
Aaron Katsman
www.IsraelNewsletter.com
It wasn’t long ago that the flag-bearer for corporate social responsibility, Ben and Jerry’s Ice Cream, went looking for a CEO. Problem was they couldn’t find a good one.
Why? Who wouldn’t want to be CEO of such a large and well-known company?
The problem was that they had made a stipulation in the terms that they were going to offer the candidate. They had a rule during the early 1980s that no employee could make more than five times what the lowest-paid worker was paid. That capped CEO pay at $81,000. What kind of well-qualified candidate would take a CEO position for that salary? No one. That’s why in ‘94 they scrapped that rule so that they could go out and get a good CEO.
Ever the demagogue, Israeli MK Shelly Yechimovich has drafted legislation limiting CEO pay to 50 times that of the lowest paid employee. She is doing this in the name of “social equality.” How will this create equality, Shelly? It won’t improve the financial lot of the lower paid employees; in fact, it will hurt them the most. How? Because they won’t get hired. If there is no financial incentive for a CEO to do a good job, then he won’t and business will stagnate, and there will be no expansion, i.e. no one new will get hired.
Executives have much more of an impact on the business than workers making the minimum wage. In fact, many times CEOs are actually the owners of the business, meaning that that have all the risk associated with failure as well. It’s a basic rule of investing: Risk vs. Reward. The more you have on the line, the more you should be able to make.
Already facing a “brain drain” with the best and brightest Israeli academics leaving Israel for greener pastures, if this legislation became law, the same thing would happen in business, something Israel can’t afford.
It’s important to note that MK Yechimovich has no business experience. She was a journalist and gained fame with a political radio show. What gives her the authority to tell us how to run a business?
Shelly, if you really want to help, stop meddling in our lives, and let us live freely, without government intrusion into every facet of society.
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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
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