Kibbutzniks trade in socialism for stocks

Earlier this year, Giora Ben Zeev, a member of Kibbutz Shamir, rang the closing bell at Nasdaq in recognition of his business’s first day as a publicly traded company.

Shamir Optical, which has been manufacturing bifocal and progressive lenses since 1972, had become the first kibbutz-owned company to be publicly traded on a U.S. stock exchange.

The addition of the kibbutz to the Nasdaq drew little notice in the American media; nevertheless, the event marked a milestone in the ongoing transition of one of the world’s most famous 20th-century experiments in communal socialism into a bastion of modern capitalism, stock options and private ownership. Ben Zeev, Shamir Optical’s CEO, also became the first kibbutznik with stock options.

Today, according to government figures, about 110,000 Israelis live on 270 or so kibbutzes, and many of those collectives are exploring whether to leave the communal model for the capitalist one.

Shlomo Getz, an expert on the kibbutz movement at Haifa University, recently told the Wall Street Journal that the re-shaped kibbutzes represent a move toward greater materialism and individualism in Israeli society.

When immigrants from Eastern Europe established kibbutzes in the early 1900s as cooperative agricultural settlements throughout the Jewish homeland, they were driven not by profit margins but by the urge to create a new and better society. These pioneers founded their communes on the principles of egalitarianism, equal distribution of pooled income, democratic decision-making by all members and exclusive reliance on internal labor.

By the 1960s and 1970s, however, it had become clear that kibbutzes could not be based solely on agriculture. So began the industrialization of the movement.

Amos Rabin, a member of Kibbutz Yakum and managing director of the Kibbutz Industries Association, noted that even as industrialization occurred, most kibbutzes maintained socialist principles.

“The kibbutzes started to set up industrial operations, such as in plastics, with low labor intensity, since the ideology called for self-employment only, without salaried outside labor,” Rabin explained. “These factories focused mainly on the local market. The ownership and the management were by the kibbutzniks themselves.”

Israel’s economic crisis in the late 1980s — combined with dwindling government subsidies — intensified the transformation of kibbutz-run companies into modernly managed enterprises and of the kibbutz itself into a less communal society.

“Back then, it was like a family factory, a big family where some of the members worked in the factory,” recalled Benny Bachrach, of Olesh Consulting, who has served as chairman of several kibbutz companies over the past 10 years. “However, they realized that they did not have all of the resources within and had to build a new organizational structure and a new corporate culture.”

For example, Kibbutz Hatzarim in the southern Negev has morphed into one of Israel’s largest industrial companies, Netafim Corp., supplying greenhouse and irrigation products. According to the company’s Web site, the company owns subsidiaries in more than 110 countries and had $300 million in sales last year.

However, the bottom line isn’t the only thing changing at today’s kibbutzes.

One of the last remaining historical ideological tenets of the kibbutz, that of complete ownership and management control, has given way to modern pragmatism over the last few years. Many kibbutz companies now have partners (including public investors) or are actively looking for them.

For the kibbutz itself, this privatization process has initiated far-reaching changes in individual income, personal property, careers and outside labor.

For example, Haifa University’s Getz said that more than 75 percent of kibbutzes now charge members for meals and that some 80 percent require payment for electricity. What’s more, he estimated more than 25 percent have introduced flexible salaries and have begun charging for health care.

The experiences of Avraham Ganani and Yael Arnin typify the changes that have occurred in the kibbutz community and the challenges remaining.

Ganani has seen much in his lifetime. As a teenager in Poland, he left his family for Russia to escape the oncoming Nazi terror. After a circuitous route that took him through Uzbekistan, he reached Israel in 1943 and soon settled with his bride on Kibbutz Ma’ala Hahamisha, nestled among the hills overlooking the coastal plain to Jerusalem.

Ma’ala Hahamisha was one of 57 “tower-and-stockade” kibbutzes set up almost overnight in the late 1930s and early ’40s to create a permanent Jewish presence throughout pre-state Israel in the face of Arab and British opposition. Like all Israeli kibbutzes of that era, Ganani’s kibbutz was founded on the socialist dictum that members worked to the best of their ability and received according to their needs. Ganani went to work in the chicken coops, and later worked in the apple orchards and at a commercial refrigerated storage facility that the kibbutz owned in Jerusalem. He spent the next 25 years working at the kibbutz’s hotel and conference center.

Ganani, now retired, is one of the leaders in his kibbutz who is trying to amicably resolve the long-running turmoil resulting from the effort to transform Ma’ala Hahamisha.

“Until the early 1990s, the kibbutz was strong and we did not think of privatization,” he recalled. “From a societal view, however, in the mid-1990s, talk began about privatization and whether to remain a kibbutz or not.

“Then, most of the veteran members … as well as some of the children of the founding generation wanted it to remain a kibbutz. However, over time, the younger generation became the majority.”

By the early 2000s, the main issue at Ma’ala Hahamisha had become not whether there would be change but rather what type of change it would be. Until then, all sources of income, including German reparations and old age payments, went into the kibbutz kupah (kitty), which supplied all necessities, communal and individual. The concept of sliding pay scales for different work — promoted primarily by the younger generation — had to be reconciled with the contributions of the veteran members, Ganani recalled.

As part of the privatization process, the kibbutz struggled over the fate of community property. Members’ apartments might be individually owned, but the fact was that over the years, as the older generation remained in smaller units, bigger apartments were built for the younger generation and for a new familial sleeping scheme that had abandoned separate children’s houses. Members also had to decide what to do with the hotel and conference center.

Some two years later, an outside arbitrator is still trying to reconcile the differences. Nevertheless, with the accumulated wisdom and optimism of an active 82-year-old, Ganani looks at what has happened at Ma’alaHahamisha with both satisfaction and hope.

“Although the situation among the members became very difficult, it can be said that no one took matters into their own hands or did anything irresponsible or irreparable,” he said. “And, despite it all, in the end the process may create a better community for us — one without the jealousies, scheming and intrigues we have today.”

Yael Arnin of Kibbutz BarAm, which is located near the border with Lebanon, has a different take on the changes sweeping her kibbutz and others.

The 30ish Arnin recently became marketing manager of Plasan-Sasa, a company owned by neighboring Kibbutz Sasa that makes body armor add-ons for military and commercial uses. She also juggles the demands of raising two small children, an international travel schedule and her husband’s travel as research-and-development project manager at BarAm’s Elcam medical factory, which manufactures molded injector devices.

But when Arnin was growing up in the 1970s and 1980s on BarAm, the kibbutz — known then for its quality apples — struggled with the decision whether to introduce black-and-white TV sets into individual members’ homes because people feared that such a move might unravel the small community’s social fabric. In the mid-1990s, however, BarAm closed its communal children’s houses, the last kibbutz to do so.

As differing kibbutz privatization models evolved throughout Israel, BarAm began adopting modern business practices, including individual career choice, within a traditional kibbutz social framework.

For example, members are paid according to the jobs they perform within the kibbutz or, like Arnin, are employed outside the kibbutz for a salary. However, all of their income goes into the kibbutz kupah to meet members’ needs.

But BarAm members, unlike people who live on more privatized kibbutzes, don’t need to swipe a pass card to eat in the dining room and don’t pay individual charges for services like laundry and electricity.

Still, says Arnin, kibbutzes that want to maintain their socialist values must find ways to acknowledge the contributions of members whose jobs might be considered menial.

“There are no personal material rewards for your efforts,” she insisted, “rather, you are compensated through your individual values such as personal satisfaction in your accomplishments and through the challenge and interest in your work.”

To help meet that challenge, BarAm has broadened career opportunities for its members and eliminated the committee that decided where everyone worked. As Arnin explained, “it became clear to the kibbutz that it had to offer the wider range of work that its members desired.”

For example, when Arnin decided that she wanted a new position, she looked for work outside of BarAm. The only criterion: The job had to meet her kibbutz’s income guidelines.

For a young career-oriented parent like Arnin, balancing home and family has not been easy. When the work day on the kibbutz used to end at 4 p.m., parents and their kids would enjoy unencumbered “quality time” until supper and a later return to the children’s communal houses.

Now Arnin can’t imagine leaving her office that early, given her international client base. But she says she doesn’t regret the personal choices that her evolving kibbutz lifestyle has caused her to make.

Speaking of choices, will Shamir Optical’s CEO Giora Ben Zeev and the company’s other executives cash in their options and become Nasdaq millionaires?

Probably not, since any stock option payouts, along with Ben Zeev’s salary and those of all the other kibbutzniks working at Shamir, will continue going into the central kupah to be paid out to members mostly on a needs basis, with only a modest additional payment going directly to Ben Zeev.

At least some things still haven’t changed as Israel’s great communal experiment begins another chapter.