The widespread criticism that the wave of salary grabs has aroused has made the board of The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) refer to legal review the benefit it planned to award CEO Eyal Lapidot, namely a loan of NIS 40 million for the purposes of buying 1.5-2% of The Phoenix, "Globes" has learned. At present, it looks as though the company's board of directors will not manage to complete the examination before new legislation on executive pay comes into force next week.
Senior managers of The Phoenix said in response that discussions on the benefit for Lapidot began two to three months ago, and at first centered on another compensation idea. At that time, the company sought external legal and financial advice, and the board is doing the same now, approaching the same advisers, out of purely businesslike motives.
As reported by "Globes" early last week, the background to the approval of the benefit for Lapidot, one of the highest paid managers in Israel, was the coming into force of the Senior Executives Law (an amendment to section 20 of the Companies Law) next week. Among other things, the new law will require employment terms of senior managers to be approved by a majority among the minority shareholders, which is expected to be a stumbling block for many current employment agreements.
A source close to the board of The Phoenix said, "Lapidot did not request that anything should be expedited. He has not been treated justly over this matter," and added, "The amendment to section 20 is indeed being taken into account, but it is absolutely not a main factor. In any case, we are not doing anything in haste, but at the proper speed, and we are acting in accordance with the law and the rules. The amendment to section 20 is a burden, but we are not horse thieves. Lapidot's compensation will be appropriate, fair and reasonable."
In 2009, when Lapidot took up his post, The Phoenix awarded him an options package on 2.5% of the shares in the company, the exercise price of which is only slightly below the current market price of The Phoenix stock, and it is borderline whether it is worthwhile exercising the options. At the time they were awarded, the options were estimated to be worth about NIS 30 million.
Eyal Lapidot has been CEO of The Phoenix since June 2009. Before that, he was CEO of Delek Israel, which, like The Phoenix, is part of Delek Group Ltd. (TASE: DLEKG). "Globes" has checked and found that in the period 2007-2011, the cost of employing Lapidot at the two companies was NIS 84 million, most of which (some NIS 60 million) was in the form of share-based compensation.
Under Lapidot's current employment terms at The Phoenix, signed for a period of five years, he is entitled to a gross monthly salary of NIS 120,000 (linked to the CPI at November 2008), and an annual bonus of the higher of 1% of the company's net after-tax profit and NIS 1.2 million.
Published by Globes [online], Israel business news - www.globes-online.com - on December 5, 2012
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