Skip To Content
JEWISH. INDEPENDENT. NONPROFIT.
Israel News

Israel Passes Law to Cap Bankers’ Salaries

JERUSALEM – The Israeli Knesset passed one of the world’s toughest curbs on bank executives’ salaries to try to narrow a big gap between bosses’ and workers’ pay.

The law was pushed through by Finance Minister Moshe Kahlon, who, ahead of last year’s election, ran on a platform of lowering the cost of living and reforming Israel’s banks. It was approved in parliament overnight in a 56-0 vote and will take effect in six months.

Bankers’ pay is a sensitive issue in Israel, especially since banks make large profits partly from a wide variety of fees on such things as deposits and withdrawals.

According to parliament’s finance committee, salaries at financial firms have grown substantially in recent years and a quarter of the 40 public companies in Israel with the highest pay levels are financial ones.

“There is a moral significance beyond the economic significance in this law,” Kahlon said on Tuesday. “It symbolizes narrowing pay gaps, solidarity and consideration for the weak.”

Moshe Kahlon Image by Getty Images

Under the new law, which also applies to insurance companies, total compensation will be capped at 2.5 million shekels ($652,605) a year, or no more than 44 times the salary of the lowest worker at the company. Anything above the ceiling will be subject to higher taxes.

Senior bankers’ compensation has risen to as much as 8 million shekels a year, a big multiple ofIsrael’s average wage of 115,000 shekels.

In Europe, there has been resistance to any mandatory ratio of top pay to bottom ranking pay, while in the United States, under the Dodd-Frank Wall Street Reform, financial firms have to disclose what the ratio is, but there is no binding ratio.

The European Union shareholder rights directive approved last year backed a shareholder vote every three years on pay policies at listed companies, but an attempt to insert a cap on pay was defeated.

Israel’s law gained widespread support from the country’s governing coalition and opposition but banks were opposed to it. Some commentators called it a populist measure that might lead to higher costs for the public if banks were to pass on any higher taxes.

Israel’s Association of Banks said the law could disrupt labor relations in the banking sector, while a spokesman for the group said it would likely appeal to the country’s Supreme Court. – Reuters

The Forward is free to read, but it isn’t free to produce

I hope you appreciated this article. Before you go, I’d like to ask you to please support the Forward.

At a time when other newsrooms are closing or cutting back, the Forward has removed its paywall and invested additional resources to report on the ground from Israel and around the U.S. on the impact of the war, rising antisemitism and polarized discourse.

Readers like you make it all possible. We’ve started our Passover Fundraising Drive, and we need 1,800 readers like you to step up to support the Forward by April 21. Members of the Forward board are even matching the first 1,000 gifts, up to $70,000.

This is a great time to support independent Jewish journalism, because every dollar goes twice as far.

—  Rachel Fishman Feddersen, Publisher and CEO

2X match on all Passover gifts!

Republish This Story

Please read before republishing

We’re happy to make this story available to republish for free, unless it originated with JTA, Haaretz or another publication (as indicated on the article) and as long as you follow our guidelines.
You must comply with the following:

  • Credit the Forward
  • Retain our pixel
  • Preserve our canonical link in Google search
  • Add a noindex tag in Google search

See our full guidelines for more information, and this guide for detail about canonical URLs.

To republish, copy the HTML by clicking on the yellow button to the right; it includes our tracking pixel, all paragraph styles and hyperlinks, the author byline and credit to the Forward. It does not include images; to avoid copyright violations, you must add them manually, following our guidelines. Please email us at [email protected], subject line “republish,” with any questions or to let us know what stories you’re picking up.

We don't support Internet Explorer

Please use Chrome, Safari, Firefox, or Edge to view this site.