Nochi Dankner's appointment of former Minister of Health Danny Naveh as chairman of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) just ahead of the court-ordered sale of the company by Dankner's IDB Holding Corp. Ltd. (TASE:IDBH) has raised serious issues of corporate governance and created an outcry. In an interview with "Globes," Naveh defends the appointment and the salary he will receive, both of which will be saddled by the company's new owners.
"Globes": You were appointed chairman of Clal Insurance as a personal appointment by Nochi Dankner, despite your lack of managerial experience in the insurance business. Do you understand why this has generated criticism?
Naveh: "I have the privilege that both Nochi Dankner and my predecessor in this job, Avigdor Kaplan, asked me to take this job. The people who appointed are Clal Insurance's directors, and I passed all the necessary procedures at the company. The shareholders have also approved me, as has the regulator. The chairmanship appointment was carried out in the most professional and cleanest manner.
"As for experience, I have a unique and important track record of public and business managerial experience. I was cabinet secretary, essentially the regulator of the government's work, I managed diplomatic negotiations in two agreements, the Wye Plantation and the Hebron Accords. I was also minister of health and led the health system through one of its greatest crises.
"In addition, I founded two successful equity funds which invested in medical technologies. There were many whiners and special interests in the criticism of the appointment, but I am looking forward, rather than being engaged in the settling of accounts. I am focused on one thing: the company's business, and it will do the talking."
Nonetheless, at the order of the court, IDB has put Clal Insurance up for sale. Under these circumstances, is it proper to appoint a permanent chairman for the company at salary of millions of shekels a year?
"There is a regulation which requires the appointment of a full-time chairman for an insurance company, not a temporary appointment of someone to serve as an interim chairman. That's unacceptable and inappropriate for the regulation of an insurance company. It is desired and even required that Clal Insurance have a permanent executive chairman from the start; anything else is unacceptable. An insurance cannot have a chairman who does not devote most of his time to the company's business."
On Sunday, Clal Insurance's general shareholders meeting approved Naveh's salary cost of NIS 4.3 million a year for an 85% position as chairman, mainly thanks to the support of colleagues from Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), Menorah Mivtachim Holdings Ltd. (TASE: MORA), and Ayalon Holding Ltd. (TASE: AYAL). The approval overrode objections from the public over the appointment itself and the size of Naveh's compensation. The approval means that his appointment, which came into effect on June 1, and the terms, are a done deal.
"There were attacks against me, but I have become immune to this in very complicated systems in the past, and I am apparently made of sterner stuff in this regard," Naveh told "Globes". "I'm hardened not to waste negative energy where it's not needed. I look forward. The criticism - that is behind me."
Your salary package was changed twice in order to secure approval by financial institutions, which are the majority Clal Insurance's minority shareholders. Your compensation was approved by colleagues in the insurance industry.
"Any objective analysis shows that my salary terms are mainstream, average, and reasonable compared with a majority of executives and chairmen of companies comparable in size to Clal Insurance."
Naveh says that he initiated the two concessions in his contract - raising the strike price of the options he will receive and changing the items in his golden parachute for the first year. "I was sensitive to the criticism and I accepted the reduction, which many executives at corresponding companies had accepted," he said.
72% of Clal Insurance's shareholders approved Naveh's salary package, which includes a monthly gross salary of NIS 110,000 for an 85% position, an annual grant of up to NIS 1.7 million, and options worth NIS 2.3 million. He is also eligible for a golden parachute of nine months salary, which will fully come into effect a year from the start of his job if he is fired, and in two years if he resigns.
Although these are terms unimaginable for the average working man or woman, they are the norm for the heads of big public companies, including the big insurance companies.
The Tel Aviv District Court, which is hearing the case of the future of control of IDB, ordered it sell at least half of its 55% stake in Clal Insurance by August 22. Asked about this, Naveh said, "This is an ongoing organized process. The company's CEO and board of directors are doing what is necessary to assist the controlling shareholder on this matter. The timetable is very ambitious, and we're doing everything so that the controlling shareholder can meet it. In any event, Clal Insurance is well run, and is financially sound. The public assets under its management are managed very professionally and seriously."
Is there interest in the company?
"I can only say that there is interest, and that when there is something to report, the company will report it. In general, Clal Insurance is a leading company with three very strong pillars: long-term savings, general insurance, and health insurance, and it has impressive growth and upside horizons."
Your wife also works for Clal Insurance. How does that work?
"She is her own person. She began working for Clal Insurance in the mid-1990s."
Published by Globes [online], Israel business news - www.globes-online.com - on July 16, 2013
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