Though they have done a great job of paying themselves large salaries, with the current economic downturn, even senior Bank of Israel officials are taking a pay cut.
According to the Jpost: “Bank of Israel Governor Stanley Fischer and 12 of his senior managers have agreed to a 5 percent
salary cut for a year, the
central bank announced Sunday. The
Bank of Israel has been under public scrutiny for paying excessive wages and benefits, compared to other state workers, including bonuses and pensions. The central bank has, in recent months, drawn criticism for its intention to allocate “outstanding performance” bonuses in a period when the private sector is undergoing efficiency measures, slashing jobs and cutting salaries. The bonuses for 2008 are part of a
salary agreement between management, employees and the government. Management has been discussing the possibility of postponing or canceling the bonuses for 2008.”
Looks like they have also entered reality and realize that they have no business paying themselves so much when everyone else is suffering.
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.
