The average salary cost for CEOs of companies included on the Tel Aviv 125 index in 2018 was NIS 3.8 million, 5% less than NIS 4.0 million average for companies on the index in 2017.
The figures are from an analysis by consultant company BDO Ziv Haft, which examined the salaries of 600 senior officeholders in 100 public companies. They believe that the law limiting salaries in the financial sector enacted in October 2016 influenced the downtrend in salaries. The average remuneration for a senior manager in the examined companies was down 1% to NIS 2.65 million, NIS 30,000 less than the average in 2017, while the pay of CFOs fell 3% to NIS 1.65 million.
The chairpersons of the same companies, however, enjoyed a 5% increase to NIS 2.85 million in the cost of their salary, following a 10% plunge in 2017, meaning that they lost 5% in 2017-2018.
BDO Consulting partner and head Yigal Toledano and executive compensation manager Edit Cohen say, "The salary approval processes we have seen show that the downtrend in senior executives' salaries corresponds with the entering into effect of the law limiting executive salaries in the financial sector in October 2016. Salary costs are being pulled down in all economic sectors, because the financial institutions whose salary was limited by a NIS 2.5 million ceiling are in no hurry to approve a higher salary in the companies in which they invest."
The average remuneration in investment and holdings companies was NIS 3.5 million, the highest of any sector and 2% more than in 2017. On the lower side is remuneration in the medical sector, which dropped 6% in 2018 to an average of NIS 1.25 million. With these data, these two sectors are keeping the same place on the list they occupied in 2017, which investment and holding companies paid an average of NIS 3.4 million and medical companies paid an average of NIS 1.3 million.
Average remuneration for senior executives
The figures for the financial sector show that the law has been relevant to them since it took effect in late 2016. Average remuneration for senior bank executives was steady at NIS 2.7 million, after dropping 9% in 2017, while average remuneration at insurance companies was up 4% to NIS 2.5 million, after plunging 19% to NIS 2.4 million in 2017.
BDO says, "Another observable trend is a move by senior executives in the financing sectors, whose pay was cut drastically, to other sectors with no arbitrary restriction on salaries."
A recent prominent example is the possibility that Eyal Lapidot CEO of Phoenix Holdings, where he was affected by the new law, will move to infrastructure and real estate group Shikun & Binui, to which the law does not apply.
Last year, Lapidot's NIS 3.7 million salary put him at the bottom of the table of the top salary earners, far below four of Phoenix's insurance agents, who are not affected by the law.
NIS 2.2 million in the cost of the salary component of the CEO's included in BDO's survey for 2018, compared with NIS 1.5 million in variable bonuses and NIS 1.2 million in share remuneration. The chairpersons received about the same regular salary, with slightly less share remuneration and about the same variable bonus as the CEOs.
Average remuneration component
According to BDO, these figures and the segmenting of the various remuneration elements of all senior executives in the companies in the survey, reflect "an upward trend in regular salary, combined with a drop in bonuses, even though the companies' performance improved in 2018, which under other circumstances would have resulted in higher bonuses."
Looking ahead, BDO says, "This trend will become stronger and more noticeable in the coming years… The change in the make-up of salaries is a kind of compensation for senior executives for the overall decline in their salary (certainty at the expense of volatility). At this point, it can be said that the trends are running counter to the objective of the law, and it is time to redress matters, including a change in the criteria used by the financial institutions and their representatives in approving remunerations packages."
Senior executives in Tel Aviv 125 companies earned 16 times the NIS 163,000 average yearly wage in Israel in 2018, compared with 18 times as much in 2017. The average cost of those executives' salary was 35 times the cost of the NIS 76,000 minimum wage in the Israeli economy in 2018, the same ratio as in 2017. These figures reflect a rather moderate reduction in the ration of the executives' salary to that of all the other employees, showing the enormous gaps that still have to be narrowed.
Published by Globes, Israel business news - en.globes.co.il - on April 7, 2019
© Copyright of Globes Publisher Itonut (1983) Ltd. 2019