No one should be surprised that the ruckus over stock options grants and bonus messes occurred precisely at Bank Hapoalim (LSE: BKHD; TASE: POLI), Israel Discount Bank (TASE: DSCT), and Bezeq The Israeli Telecommunication Co. Ltd. (TASE: BEZQ). In all three cases, domineering and independent managers entered a vacuum left by the companies’ controlling shareholders. The real owners preferred control by remote control, and allowed their chosen managers complete managerial freedom of action.
Shari Arison was uninterested in Bank Hapoalim for a long time, and allowed chairman Shlomo Nehama to become the powerhouse at the bank. Nehama was the man who made the decisions; the man with the final say-so.
Matthew Bronfman resides in the US and relies on Discount Bank chairman Shlomo Zohar and CEO Giora Ofer to run things. Haim Saban loves Israel, but only plays a role in Bezeq through telephone calls from his home in Beverly Hills.
The result is that hired managers become the de facto owners. They become the strongmen in the company and arrange generous compensation packages for themselves, which embarrass the controlling shareholders and get the company into trouble with the Israel Securities Authority.
The most important message to all you independent managers might be as follows: when you are an employee, you can have a long affair with your owners, create value for them, and become a member of the household. That’s all very nice and well, until you are struck with the sin of pride, one of managers’ most contagious sins. You begin to think that you are indispensable, that the business was created in your image, and that you deserve the whole world. You would be wrong to think that a company’s success is mostly your own personal success. In many cases, that is the moment that you fall from grace with the owners, and they begin to ask: How much money did you make for yourself?
Apparently, the $150 million that Nehama made for himself with great skill cannot compensate for his feelings of pain over his retirement/resignation/ouster. Since taking leave of Shari Arison, it seems a campaign has been launched to serve Nehama’s interests. The firing, it is written, is the capriciousness of a billionairess absorbed in her spiritual world, a momentary whim of a rich woman who wants to fix the world.
True, there was an ordinary meeting between Arison and Nehama, when she exploded, and Nehama, the talented manager who led Bank Hapoalim to extraordinary achievements, was promptly sent home.
Bank Hapoalim’s board of directors is “stunned”, “shocked”, and is demanding explanations. The directors are standing behind Nehama; after all, it has supposedly been his board for a long time.
The Bank of Israel is now jumping into the matter, and asking Arison for “explanations”. What a party.
We are sure that Nehama is not behind all of this campaign, but this is the moment when he should make himself heard loud and clear, swallow his bile, and overcome his feelings of pain and insult. No caprice, no whim, but a separation, however painful from Shari Arison, but it is her right, as the bank’s owner. Nehama should say, I love this bank, I brought it forward, I contributed to its development, I invested my best efforts in it, but the bank is greater than all of its managers.
However, hot blood always trumps cold cash. It’s all personal, emotions are everything, and ego counts, even when $150 million separates Nehama from Arison.
Published by Globes [online], Israel business news - www.globes.co.il - on March 19, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007