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The Israel Securities Authority senses significant problems with the process by which wage packages were approved by the Hapoalim board for bank CEO Zvi.

The watchdog may even demand that Ziv forgo at least part of the NIS 34 million remuneration that he received for 2005, the highest salary ever paid to anyone in Israel.

The main problem the ISA is investigating is the fact that the board approved the formula for calculating the bonus without knowing the numbers involved.

In other words, the board voted in favor of a formula that linked the bank's profits and Ziv's remuneratio, without any examples of the expected bonus in accordance with projected profits.

The ISA's suspicions seem justified, at least from statements presented to the stock market by the bank. Thus, in October 2005 the board approved the conditions for the bonuses to be awarded to deputy chairman Danny Dankner.

The reasoning behind the decision was published in a statement to the stock market, and from the statement it appears that the board was given details of the cost to the bank of various components of Dankner's salary, but not those pertaining to the extra to which he was entitled, a grant deriving from the bank's profits and from the growth of the bank's balance sheet.

On this component the statement said, on behalf of the subsidiaries of the bank, which are headed by Dankner (Poalim Capital Markets and Isracard) that "the cost estimate of the bonuses for Isracard: the size of the relevant bonuses will be determined according to the conditions detailed in the clauses concerning the bonuses."

The same bonus was approved at the same time for the chairman, Shlomo Nehama, but in Nehama's case there was no detailed account of the board's decision filed with the stock market. From the statement concerning Dankner, we can conclude that the board approved formulas for bonuses without being informed of the cost of the formula in different profit scenarios.

Another fault in the approval of Ziv's bonus was that it may have been approved without an explanation of why it serves the bank's interest. The existence of this fault may also be understood from the statement to the stock market concerning the approval of Dankner's bonus.

In the statement, it says that "the monthly remuneration is fixed in accordance with Mr. Dan Dankner's great and significant contribution to the operations of the bank's subsidiaries, and in accordance with the qualifications and the experience of Mr. Dan Dankner, as was reflected during his tenure as chairman of Isracard and Poalim Capital Markets. His willingness to continue to serve as chairman and to devote his time to Isracard and Poalim Capital markets serves the interests of those companies. All of these justify his continued service as chairman."

This is a standard wording, which does not go into any meaningful discussion, such as why a bonus - as opposed to a remuneration - was approved, a comparison of bonuses and remunerations in other companies, whether it was possible to continue to employ Danny Dankner as chairman at a smaller cost, what negotiations and other decision-making processes were gone through at the bank before the size of the bonus was determined, whether an external adviser was consulted, etc.