The Ministry of Finance and Bank Leumi (TASE: LUMI) are on a collision course. On Sunday, Minister of Finance Yair Lapid came out against the bank's executive compensation policy, under which executives will receive NIS 30 million in stock-based compensation, and an additional NIS 30 million in bonuses.
"This is too much. At a time when most Israelis cannot make ends meet, bank executives (and not just at Bank Leumi) cannot behave as if the party is still going on," wrote Lapid on his Facebook page on Sunday.
Bank Leumi is unperturbed by Lapid's remarks. It noted that the state owns just 6% of the bank, while the other 94% are owned by others. As of now, the bank has no plans to change its compensation plan. The bank's general shareholders meeting will discuss the plan on September 12.
Accountant General Michal Abadi-Boiangiu is handling the talks with Bank Leumi. She is an accountant and an attorney, and served as controller at First International Bank of Israel (TASE: FTIN) for several years, and is considered an expert in the field.
Lapid wrote, "Since the State of Israel owns 6% of Bank Leumi (through State of Israel Properties - A.F.), I have ordered the Ministry of Finance Accountant General to make our objections clear to the bank's management. If that does not help, we will vote against the compensation plan, and I assume that the Bank of Israel will also have something to say on the matter. I greatly hope that in the time remaining until the general meeting, they will understand at Bank Leumi that they must rethink this matter."
Lapid expressed the hope that Bank Leumi's board of directors would get the hint and that there would be no need for a confrontation. "I greatly hope that in the time remaining until the general meeting, they will understand at Bank Leumi that they must rethink this matter," he wrote.
However, it seems that a confrontation is inevitable, as sources inform ''Globes'' that Bank Leumi has no intention of changing its compensation plan at this time. At Lapid's request, Abadi-Boiangiu spoke with Bank Leumi CEO Rakefet Russak-Aminoach. They agreed that the bank "will respond to any request for clarification or explanation with regard to the compensation plan, if and when necessary." Today, Abadi-Boiangiu sent the bank a long list of questions about the plan.
Sources at Bank Leumi wished to point out that, traditionally, salaries at the bank have been lower than at its competitors, and that that will also be the case in the future, under the new compensation plan. In addition, in the past two years, the bank has awarded no bonuses at all, and last year, executives even returned hundreds of thousands of shekels in a "reverse bonus."
Published by Globes [online], Israel business news - www.globes-online.com - on August 26, 2013
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