Entropy opposes Israel Corp compensation policy

The policy has earned approval from ISS Proxy Advisory Services.

After objecting to the salary policy at Israel Chemicals Ltd. (TASE: ICL), Entropy Consultants Ltd. also opposes the compensation and salary policy at its parent company, Israel Corporation (TASE: ILCO), controlled by Idan Ofer. Meanwhile, sources inform ''Globes'' that ISS Proxy Advisory Services has approved Israel Corp.'s compensation policy.

Entropy opposes the bonus promised to Israel Corp. executives for the future split of the company that it announced over a month ago. This bonus is not subject to a specific financial target, but merely for implementation of the split.

Israel Corp.'s compensation committee decided that if the split is carried out, special bonuses will be awarded of NIS 4 million to CEO Nir Gilad, NIS 3.2 million to chairman Amir Elstein, NIS 2.6 million to a senior VP, and NIS 1.6 million to a VP.

Entropy says that Israel Corp.'s compensation committee set a salary cap similar in size to the current levels at the company. "The policy does not set out clear quantitative targets for officers or at least for the CEO and chairman, but only describes them," says Entropy. It adds that Israel Corp.'s threshold condition of a net profit of $100 million for awarding the bonuses is ineffective. "Most of the company's profit comes from the activity of Israel Chemicals. Therefore, any link between this threshold condition, which has a strong probability of being reached, and the extra managerial contribution by the company's managers, for which they are due to be compensated, is low, in our opinion," it says.

Israel Corp.'s new compensation policy, which shareholders will vote on at the general meeting on September 3, states that the basic gross monthly salary, which does not include related expenses, will be capped at NIS 246,000 for the CEO, NIS 221,000 for the chairman, NIS 158,000 for a senior VP, and NIS 97,000 for a VP. Executives will be entitled to six months' notice of dismissal, and they will be eligible for a paid adaptation period of the same length.

The main compensation component in the salary of Israel Corp. executives is a bonus, which is derived from the company's profits. In the case of Gilad, this component can reach NIS 5 million, and for Elstein, it can reach NIS 4 million. Awarding the maximum bonus is subject to Israel Corp. posting a net profit of $300-350 million.

Israel Corp.'s compensation committee did not set a new policy for the capital component in the salary package of its executives. Under its policy, Gilad received options worth NIS 25 million, which he can exercise in 2014-16. In 2012, Gilad had a salary cost of NIS 10 million: NIS 4 million in cash, and NIS 6 million in a stock benefit. The salary cost of Elstein, who decided in response to public pressure to waive options in an amount similar to the options given to Gilad, was NIS 7.2 million in 2012, half in cash and half is stock-based compensation.

Published by Globes [online], Israel business news - www.globes-online.com - on August 20, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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