Will the increase in executives' salaries, as reflected in the tables of top earners in 2013, be stemmed in the coming years, following implementation of Amendment 20 (the executive salary law) to the Companies Law? A study by BDO Ziv Halft partner and manager of the SOX and Corporate Governance Consulting Department Keren Kibovich suggests the opposite.
Kibovich's data indicates that, at Tel Aviv 100 Index companies, the executive compensation caps approved in 2013 under Amendment 20 - both the basic salary and bonuses - were on average higher than their actual salaries in 2012. The biggest difference was for salaries of VPs.
This means that Amendment 20 actually created the potential for pay hikes. "Although it is necessary to wait for three more years to test the effect of the amendment, the impression at the moment, mainly because of the caps, is that it will cause an increase in executive salaries," says Kibovich. "The moment the legislature mandated a company to disclose in advance the maximum salary that it is prepared to pay an officeholder, that is what he will seek. This process necessarily leads to a rise in salaries."
BDO Ziv Half presented the data at an Israeli Association of Publicly Traded Companies conference for legal counsel, company secretaries, and CFOs. Association president Ilan Flato said that Amendment 20 was not intended to limit executive salaries, but only to create an orderly compensation policy. "At the moment, because in practice Entropy Consultants and the Israel Securities Authority demand bonus caps, the regulators are simply forcing salaries higher," he warned.
Published by Globes [online], Israel business news - www.globes-online.com - on April 7, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014