Hapoalim Chairman Seroussi Says He Will Step Down by Year's End

In statement, he makes no mention of sexual harassment affair by former CEO Zion Kenan, pointing instead to bank’s financial performance during his tenure.

Yair Seroussi speaks at Haaretz's Innovation Conference, September 21, 2016.
Yair Seroussi speaks at Haaretz's Innovation Conference, September 21, 2016. Tomer Appelbaum

Bank Hapoalim chairman Yair Seroussi surrendered to pressure from regulators and shareholders over his role in improperly settling a sexual harassment case, saying on Tuesday he would resign at the end of the year.

Seroussi, whose contract expires only next September, has been under fire since it was revealed earlier this month that he had investigated harassment accusations made by an employee against former CEO Zion Kenan and then arranged a 6 million-shekel ($1.6 million) payment to her without informing banking regulators or the board, as required under regulations.

Seroussi publicly apologized for the affair three weeks ago, but in a letter to the board, he made no mention of the affair and pointed to his achievements since he had taken over as chairman in 2009.

“After seven-and-a-half very successful years as chairman of Hapoalim I am announcing today the end of my term by the end of the year,” Seroussi said.

“I arrived at the bank in 2009 in the midst of a financial, management and ethics crisis,” he wrote, referring to the legal entanglements of his predecessor Danny Dankner. “I am leaving a healthy, stable, strong and profitable organization whose capital has doubled – and about this I am very proud. I am leaving when the share price is at its peak and the return to investors since I came to the bank has been 132% – the highest in the banking system.”

However, in a letter to Hapoalim staff, Seroussi made a tacit defense of his actions.

“All events at the bank were handled by me in a responsible and sensitive way, with complete commitment. I always worked for the good of the bank, its clients and its employees. I did a lot to improve the organizational culture at the bank, respecting each and every employee,” he wrote.

Meanwhile, Channel 2 reported that Hapoalim had other problems: Agents of the U.S. Federal Bureau of Investigation raided the bank’s Miami offices in connection with a probe into corruption of the world soccer organization FIFA (International Federation of Association Football). Shares of Bank Hapoalim ended virtually unchanged at 23.15 shekels Tuesday.

In fact, despite the bank’s chronic governance problems, its shares have outperformed most of its peers. They are up about 18% so far this year, second only to Mizrahi Tefahot, and its market capitalization of 30.8 billion shekels exceeds its biggest rival by 7.1 billion.

Bank Leumi has shown more business initiative in recent years, developing a high-tech finance business and moving more quickly into digital banking. It also acted faster than Hapoalim to settle with U.S. authorities for their alleged role in helping clients evade taxes. Hapoalim has set aside 600 million shekels for the probe but hasn’t reached a settlement.

But Hapoalim has generated a return on equity of 9-10% in recent years to Leumi’s 8-.8.5%.

Sources say Shari Arison, Hapoalim’s controlling shareholder, was not informed about the harassment affair at the time it occurred 10 years ago and that Seroussi lost her backing in his efforts to remain at the job.

As a result, already several weeks ago Arison began searching for a replacement and has already reached an understanding with Oded Erna, a 61-year-old attorney and long-time acquaintance. Eran served for 23 years as a partner in the Tel Aviv law firm Goldfarb Seligman & Company but stepped down six years ago to an advisory role. He joined Hapoalim’s board as a director last February.