TEL AVIV: A member of Israel’s governing coalition has proposed a new that forbid the CEOs of Israeli public companies from earning 50 times more then the lowest paid worker in the same company.
“There is a need curb these outrageous wages,” Prof. Chaim Fershtman of the Eitan Berglas School of Economics at Tel Aviv University told The Media Line. “I don’t see any economic justification for these salaries. There is no equilibrium with the market.”
Fershtman argued that there is no need for haste.
“It’s not clear what type of regulation is needed,” Fershtman said. “Maybe its better to wait and see what other countries are doing.”
Omer Moav, a professor of economics at the Hebrew University of Jerusalem, agreed.
“It’s silly and will not achieve anything,” he The Media Line. “Its not the right way to deal (with the problem).”
Moav argued that rather focusing on CEO pay, the government should pay lower level workers better.
“It’s a problem of envy” he said. “But those that make more that 200,000 shekels a month is a tiny minority. This is not helping its just symbolic.”
“You have to be intelligent not just popular,” Moav said “it would be a very bad signal for foreign investors.”
Should the proposal be adopted, many of the CEO’s that would be effected are those working for companies owned by the 20 or so families that control the majority of Israel’s economy through complicated cross-ownership structures and various holding companies.
“Firms employ some of their lowest paid workers directly and not through a contractor,” Moav said, pointing out that if the workers are hired from outside the company they do not count as part of the company’s wage structure. “So one way they can get around this is by firing the cleaner and rehiring from a contractor.”
Moav said that the relatively small group of families that control the Israeli economy regularly use high salaries as a way of withdrawing money from their various companies for their own benefit rather than paying out a dividend to stockholders, a practice that essentially cheats people that have invested in the company.