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Apr 25, 2010
Limiting Salaries
A law is being discussed in the government that would, if passed, limit the salary level the directors of public companies could earn. Is the USA "public companies" generally refers to companies trading on the stock market. In Israel "public companies" refers to companies under government regulation.
While the private sector can do whatever it wants and pay whatever types of salaries it wants, there is a lot of criticism when people find out that the CEO of a "public company", a company that is funded a lot by our taxes, is paying its directors and management teams ridiculous salaries, even to the tune of 1.5 million shekels a month!
The proposed law would limit the highest salary to 50 times what the lowest salary in the company is. Meaning, if the lowest salary in the company is 4000NIS per month, the highest salary could only be 200,000NIS per month.
I heard this morning on the radio an argument between Roni Rahav (a PR guy) and Minister Katz (one of the promoters of the proposed law) about this law. Roni Rahav made some good points, especially when he was presented with the question "why the director (some director in the misrad ha'otzar I think) needs so much money and what he can possibly do with 1.5million per month", he responded that it is nobodies business - he earns his salary legally, he pays taxes on it to the tune of 50% and he can do with his hard earned money whatever he wants and it is nobodies business.
Minister Katz on the other than did not really present any strong arguments. The main argument on his side is that it is a public company, not the private sector, and paying a director 1.5 million instead of 500,000, for example, has not been shown to increase the fortune of the company and is wasting government and taxpayer money.
I do like the concept of limiting the high salary to a multiple of the low salary - the directors will be more inclined to give the low end earners salary increases because by doing so they will be allowed to increase their own salaries as well... A win-win situation...
At the end of the day, Israel is a capitalist economical system and people will be paid what they are deemed to be worth.
While the private sector can do whatever it wants and pay whatever types of salaries it wants, there is a lot of criticism when people find out that the CEO of a "public company", a company that is funded a lot by our taxes, is paying its directors and management teams ridiculous salaries, even to the tune of 1.5 million shekels a month!
The proposed law would limit the highest salary to 50 times what the lowest salary in the company is. Meaning, if the lowest salary in the company is 4000NIS per month, the highest salary could only be 200,000NIS per month.
I heard this morning on the radio an argument between Roni Rahav (a PR guy) and Minister Katz (one of the promoters of the proposed law) about this law. Roni Rahav made some good points, especially when he was presented with the question "why the director (some director in the misrad ha'otzar I think) needs so much money and what he can possibly do with 1.5million per month", he responded that it is nobodies business - he earns his salary legally, he pays taxes on it to the tune of 50% and he can do with his hard earned money whatever he wants and it is nobodies business.
Minister Katz on the other than did not really present any strong arguments. The main argument on his side is that it is a public company, not the private sector, and paying a director 1.5 million instead of 500,000, for example, has not been shown to increase the fortune of the company and is wasting government and taxpayer money.
I do like the concept of limiting the high salary to a multiple of the low salary - the directors will be more inclined to give the low end earners salary increases because by doing so they will be allowed to increase their own salaries as well... A win-win situation...
At the end of the day, Israel is a capitalist economical system and people will be paid what they are deemed to be worth.
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"At the end of the day, Israel is a capitalist economical system and people will be paid what they are deemed to be worth."
ReplyDeleteUm, I think it's more like they will be paid what the employer can get away with. Really, there is not much correlation between the salaries and productivity, if there were then salaries would go down once in while too. When was the last time you saw that happen to the directors of a public company???
Whats the rade with the eruv snipping?
ReplyDeletedont know. I heard somethign happened, but I didnt get details. I even saw them walking friday night with a goy to fix it....
ReplyDeletebut I dont know details
Corruption seems to be the name of the game here. It seems to be "the rule" rather than "the exception"
ReplyDeleteAt one point Ben and Jerry's put a hard cap on what they were going to pay their new CEO to avoid having over paid executives. They had a really hard time finding someone.
ReplyDeleteImagine an executive responsible for a budget of millions or even billions of NIS having his salary contingent on how much they are willing to overpay the janitorial staff. I guess all entry level positions will be contracted out and public companies will stop hiring students for summer jobs. The alternative is to have the best of the best remain in the private sector and have 2nd tier executives responsible for managing public money.
I do like the concept of limiting the high salary to a multiple of the low salary - the directors will be more inclined to give the low end earners salary increases because by doing so they will be allowed to increase their own salaries as well... A win-win situation...
ReplyDeleteI don't think that will be the case. If the lowest-paid employees got a raise just so that the CEO could get one too, everyone in the middle would complain that they should also have their salary increased.
The simplest solution for the CEO would be to outsource the function of the lowest-paid workers, thus taking them out of the equation and de facto raising the minimum salary in the company without actually giving anyone a raise (besides the CEO, of course). This might end up costing the company more (especially if the head of the outsourcing company has to raise his rates in order to pay his workers more so that he could raise his own salary).
Specifics aside, the major problem with the proposal is that the people who would be affected by it got to their positions because they are smart, and know how to get around obstacles. They'll use their abilities to get around this one, too.