In a 145-page document, the state sets out its response to the petition brought by the banks and insurance companies against the law limiting the salaries of their executives. The state rejects out of hand the petition against limiting the salary recognized for companies tax purposes of the highest paid employee to 35 times that of the lowest paid in the company, but it supports the proposal by Deputy Attorney General Avi Licht for excluding rights accumulated in the past from the provisions of the law.
"The law expresses the social and economic policy of the legislator on remuneration, and therefore redoubled caution should be exercised in bringing to bear judicial review," the state argues in response to the demand that the provision on the ratio between highest and lowest pay should be voided.
The state further argues that the right to equality is not infringed by the law, and, if it is, not to the extent of impairing human dignity.
The State Attorney's Office adds, "The rights to freedom of occupation and freedom of contract are impaired," as the banks and insurance companies claimed, "but the burden of demonstrating the degree of impairment has not been taken up. On the face of things, it appears that the impairment is not to the core of the right, and its severity is thus light."
The state's response also points out that the financial institutions can raise the minimum salary in the company, and thus become able to raise the salaries of senior managers, and mentions the example of the decision by insurance company Harel to raise the minimum monthly salary in the company to NIS 6,000, which is higher than the general legal minimum.
While the state's position on the salary cap is that it is adamant that the petition should be dismissed, on past employees' rights its position is more nuanced, and it does not reject out of hand the banks and insurance companies' claims. There are fears in the financial sector that, because of the wording of the section of the law limiting the salary recognized for tax purposes to NIS 2.5 million annually, veteran employees whose pension rights are higher than this amount will want to leave their jobs before the law comes into force in order not to harm their retirement packages.
The main impact is on the two biggest banks, Hapoalim and Leumi, where 215 senior employees are thought likely to leave their jobs if the law is applied to pension rights accumulated to date. Supervisor of Banks Hedva Ber has warned that if so many senior managers leave the banks this could cause shocks in the banking system.
So far, everyone involved in creating the law on executive pay, from Minister of Finance Moshe Kahlon downwards, has said that there was no intention of harming the pension rights of managers at the banks. Nevertheless, the law's current wording is open to the legal interpretation that it does apply to past rights. On this question the state suggests adopting the proposal put forward by Licht, in which he states, cautiously and with reservations, that it is possible not to apply the law to past rights.
Published by Globes [online], Israel business news - www.globes-online.com - on August 30, 2016
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