Israel moves to reduce power of big business

By Anshel Pfeffer, September 22, 2011
Treasury's Chaim Shaniwill address cross-ownership

Treasury's Chaim Shaniwill address cross-ownership

Two high-level government committees are about to change the way Israel's economy functions.

One of the two bodies addressed the issue of cross-ownership in a report issued on Monday. The other, which is due to deliver its initial report next week, will propose new priorities for the government's budget.

The commission on cross-ownership, headed by Treasury Ministry Director-General Chaim Shani, announced on Monday that new laws would be passed to break up some of Israel's biggest financial and commercial companies.

Over the next four years, large corporations will be forced to choose between holding shares in financial or non-financial companies.

They will be allowed to keep either their holdings in assets such as banks, insurance companies and investment funds, or their ownership of firms such as supermarkets and telephone companies.

Protesters say planned moves are ‘Too little, too late’

In addition, minority shareholders will be given extra powers to control wages of senior employees, and directors will not be allowed to sit on the boards of both financial and non-financial companies.

Prime Minister Benjamin Netanyahu said at the press conference announcing the recommendations that limiting cross-ownership would also lead to a reduction in consumer prices. "When there is no competition and there are monopolies, the consumers pay more," said Mr Netanyahu.

The activists who organised the protests that swept Israel over the summer criticised the report, saying that "it was too little, too late" and that it would do little to change the Israeli economy.

"There are no recommendations to alter the monopolies within business sectors," said economist Professor Yossi Yonah, who is advising the protesters.

Meanwhile, the Trachtenberg Commission, set up in the wake of the protests to reorder budget priorities, is to deliver its first report next week.

It is expected that the commission will recommend a diversion of funds from the defence budget to education and social programmes, and the cancellation of plans to reduce the top bands of income tax.

The government has directed that the new programmes must all be carried out within the framework of the current budget, without widening the national deficit.

The expected recommendations have already led to open warfare between the Defence and Treasury ministries. Senior defence officials have criticised the reduction of their budget at a time of uncertainty in the Middle East as "gross irresponsibility".

Defence Minister Ehud Barak said over the weekend that Finance Minister Yuval Steinitz was taking "a dangerous course" and that the budget should be enlarged to enable the government to meet both security and social challenges.

Last updated: 2:06pm, September 22 2011