Cabinet approves proposals to reduce over-concentration of wealth

If adopted by the Knesset, measures could force out dozens of company directors

This demonstration in Jerusalem in August 2011 was one of many throughout the country protesting social inequalities and high living costs (photo credit: Yossi Zamir/Flash90)
This demonstration in Jerusalem in August 2011 was one of many throughout the country protesting social inequalities and high living costs (photo credit: Yossi Zamir/Flash90)

The cabinet unanimously approved on Sunday the recommendations of a committee set up to combat Israel’s over-concentration of wealth. The prime minister, along with the finance and justice ministers, were tasked with implementing the plans, contained in the “Report on Economic Centralization.”

The Committee on Enhancing Competitiveness in the Economy studied Israel’s existing economic structure, financial stability and economic efficiency and recommended a series of measures expected to reduce wealth concentration.

The real fight over the committee’s recommendations is expected to take place in the Knesset plenum, where the so-called tycoons and their lobbyists will be waiting to pounce on any strongly worded legislation.

Concern over the exaggerated concentration of wealth — with a significant proportion widely reported to be resting in the hands of just 20 or so families — was a feature of last summer’s social protests, where demonstrators argued that many of the monopolies that control the economy need to be brought down. Grievances over perceived inequalities, reinforced by statistics indicating a widening gulf between haves and have-nots in Israeli society, continue to dominate political discourse.

Over-concentration in Israel’s economy is characterized by pyramid structures within businesses, cross-ownership of numerous companies (defined as financial and non-financial holdings), and also by the sale of government assets to private citizens. The committee’s report requires the separation of financial and non-financial holdings. It states that directors leading companies that manage at least NIS 40 billion worth of citizens’ assets (financial companies), in the form of savings plans, pension funds, and the like, must be prevented from also heading companies that manage at least NIS 6 billion in Israeli sales (large non-financial companies).

In practice, the report’s recommendations, if adopted by the Knesset, would mean that more than 40 Israelis would need to leave their positions as directors from at least one company, according to Israeli media reports.

Globes reported on Thursday that the Liberman and Abeles families of Australia, Israeli businessman Zadik Bino’s partners in the controlling core of Paz Oil Company Ltd and First International Bank of Israel, threatened to sue Israel in international court if the government voted to adopt the recommendations of the committee at Sunday’s meeting. The recommendations, if pushed through into legislation, would force the partners to sell either their financial holdings (First International Bank), or their non-financial holdings (Paz) within four years.

The committee was set up in response to the burgeoning social protest movement in Israel. Last summer, hundreds of thousands of Israelis took to the streets to protest Israel’s skyrocketing cost of living, and directed much of their anger against the cohort of powerful businesspeople who control much of the country’s wealth.

A new wave of social protests is expected this summer. That may have pushed the committee’s report to the top of the prime minister’s agenda.

The committee is made up of Prime Minister Benjamin Netanyahu, Finance Minister Yuval Steinitz and Bank of Israel Governor Stanley Fischer. It is chaired by Haim Shani, formerly the director general of the Finance Ministry.

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