Is the salary party coming to an end? Minister of Finance Yair Lapid, who in recent months has spoken out against the high salary costs of executives in public companies, has asked top Ministry of Finance officials, including director general Yael Andorn, Accountant General Michal Abadi-Boiangiu, and legal adviser Yoel Briss, to review the executive salaries at financial institutions that manage the public's money.
Following extensive discussions on the matter, the top officials proposed capping expenses recognized for tax purposes relating to executive salaries at financial institutions and bodies that manage the public's money. The salary cost of an executive (basic salary, variable salary, and capital components) in excess of NIS 3.5 million a year will not be an expense deductible for tax purposes, but will be part of the company's taxable profits.
The Ministry of Finance also proposes requiring a majority of shareholders who are not part of the controlling interest to approve a deviation from the salary recognized for tax purposes in a general meeting, taking into account the general effect on the financial institution. Lapid will submit a draft amendment to the tax code in a few weeks.
The Ministry of Finance says that the rationale for the proposal is that these institutions, which manage the public's money, have a critical effect on the Israeli economy, both in terms of household spending (bank fees, management fees), and in terms of setting standards for executive salaries. The proposal is partly due to the increase in executives' salary costs at financial institutions in recent years.
"The Ministry of Finance will continue to review compensation at these institutions and in public companies, and the need to take additional steps to instil proper standards for compensation policy," said the ministry.
"The executives' salary party must come to an end," said Lapid.
Published by Globes [online], Israel business news - www.globes-online.com - on April 7, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014