Bank Hapoalim (TASE: POLI) chairman Yair Seroussi is expected to leave his position in the coming months, sources inform "Globes." His resignation follows a complaint by a former bank employee against former CEO Zion Kenan for sexual assault. Seroussi failed to notify the bank's board of directors and the Bank of Israel of the incident. The sources added that Seroussi was slated to meet Supervisor of Banks Hedva Ber soon to discuss the matter. Seroussi's associates say that he is waiting for Ber's report on the Kenan affair.
The Bank of Israel said in response, "The Banking Supervision Department's examination process has not yet been completed, so any comment on the findings in the process is mere speculation." No comment was forthcoming from Bank Hapoalim.
Seroussi's contract, which expires in August 201, will not be extended. It is believed that he will leave his position before the end of his contract, following the reports of the Kenan affair several weeks ago.
It was revealed in early August that a former employee of the bank had complained of sexual assault by Kenan during a business trip to Kazakhstan 10 years ago. The bank appointed an arbitrator to hear the complaint, but Seroussi, who knew of the affair, informed neither the Bank of Israel Banking Supervision Department nor the Bank Hapoalim board of directors, for which he was sharply criticized. The Bank of Israel responded to the affair by saying that it took very seriously the fact that Bank Hapoalim had not informed the Banking Supervision Department of the complaint, and announced that it would conduct an examination of the matter. The Israel Securities Authority also announced that it would consider the matter.
Seroussi apologized for not informing the Bank of Israel, telling Channel 2, "I apologized to the Supervisor of Banks and the board of directors for not informing them of the matter. We will draw conclusions and cooperate with the Bank of Israel and the Securities Authority in any probe they conduct." It is doubtful, however, whether this apology will convince the Bank of Israel to put an end to the affair.
The former employee who filed the sexual assault complaint brought it up as part of her negotiations with the bank on the terms for leaving her job. Kenan was still CEO at the time (although he had already announced that he was leaving). Seroussi was immediately informed of the particulars, and after getting legal advice, it was decided to appoint former Labor Tribunal president Judge (ret.) Steve Adler as arbitrator. Adler did not find that the complaint was justified, but recommended that the bank pay employee an extra NIS 3 million in compensation because of the difficult work condition she had experienced in Kazakhstan.
The increased compensation was perceived as hush money for the complainant. Furthermore, the fact that Seroussi did not inform the relevant parties of the affair further supported the impression that the bank was trying to cover it up. Legal sources said that had Seroussi behaved transparently with the relevant parties in the affair, there would have been far less public involvement and criticism than actually occurred when Channel 2 reported the matter.
Seroussi, 61, has been chairman for over seven years. He previously served in a number of positions at the Ministry of Finance, including heading a delegation to the US. 23 years ago, he inaugurated Morgan Stanley's activity in Israel, and managed its business here for 16 years. He has also been a director in several companies, including Israel Corporation (TASE: ILCO). He was appointed chairman of Bank Hapoalim in August 2009.
Seroussi came to the bank at a difficult time. He replaced Dan Dankner, who was dismissed by then-Governor of the Bank of Israel Stanley Fischer. Bank Hapoalim's public image was poor at the time, it had corporate governance problems, and had still not recovered from the heavy losses on financial instruments caused by the 2008 crisis. Seroussi was not Bank Hapoalim controlling shareholder Shari Arison's first choice; his appointment was urged by Fischer. Regarded as an affable and presentable man of integrity, Seroussi restored tranquility to the bank, and repaired its relations with the regulators, headed by the Bank of Israel.
The good labor relations introduced by Seroussi enabled Kenan, who was appointed CEO at the time, to make profound changes at Bank Hapoalim that substantially improved its results. The main added value that Seroussi brought, however - his ability to get along with outside parties such as the regulators - is probably what will force him to leave: his behavior with the board of the directors and the Bank of Israel in the Kenan affair.
In addition to restoring Bank Hapoalim's good outside relations, Seroussi also urged the bank to focus on its core banking business (back to basics), in place of the investment in financial instruments and global expansion featured in the preceding years. Seroussi also targeted the Arab sector, high tech, and fintech several years ago as areas of important growth for the bank. These sectors are now proving their important potential for the bank's growth.
In addition to his position at Bank Hapoalim, Seroussi has also been president of Union Bank of Israel (TASE: UNON) for the past two years. His main challenge there was dealing with the increasing banking regulation and the anti-bank public atmosphere. In his period as Bank Hapoalim chairman, the cost of Seroussi's salary totaled NIS 51.1 million (not including figures for 2016, which have not yet been published), an annual average of over NIS 7 million.
Seroussi's salary was due to plunge to the NIS 2.5 million ceiling permitted under the Executive Salary Law, which is 60% less than this salary to date. It is believed that because of this development, there was little chance of Seroussi extending his contract beyond August 2017, even without the Kenan affair.
Published by Globes [online], Israel business news - www.globes-online.com - on November 27, 2016
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