The Knesset today passed amendment 20 to the Companies Law in its second and third reading. The amendment is expected to change the rules of the game when it comes to setting salaries of senior executives at public companies.
According to the new amendment, remuneration policy for senior executives will b set by a special committee for salary matters appointed by the board of directors and comprised mainly by external directors. The other members will be independent directors. The committee will make its recommendations for approval by the board and subsequently for approval by the shareholders meeting.
Formulating executive salaries policy will now be the obligation of a group of company directors who are renewed once every three years. The policy will include measurement criteria which will be a condition for the remuneration.
Gornitzky & Co. partner Adv. Yair Shiloni, an expert in corporate law and the capital market, told "Globes" that the new law will not necessarily lead to a change in trend in the rise in executive pay. He said, "However, it might create no few difficulties in bringing in good managers to public companies, which are the vital human capital for a company's success.
He added, "In the most absurd way, the company's largest shareholders will lose almost completely the ability to choose the management staff of the company that they own."
Published by Globes [online], Israel business news - www.globes-online.com - on November 5, 2012
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