Hapoalim to Keep Paying Dankner for 18 Months

Danny Dankner will soon be vacating his seat as chairman of Bank Hapoalim, stepping aside for Yair Seroussi, in keeping with the directive of Bank of Israel Governor Stanley Fischer. Dankner will continue receiving full wages, however, for another 18 months - a 6-month paid cooling-off period, during which he is not allowed to work for another bank, and a further 12 months' severance pay, because his contract was terminated. Each month Dankner will receive about NIS 150,000, plus car and telephone expenses.

In addition, Dankner will receive compensation equivalent to 250% of his monthly salary for each of the 4.5 years he served as chairman of Hapoalim and chairman of Hapoalim subsidiaries Hapoalim Capital Markets and Isracard.

Outgoing Hapoalim CEO Zvi Ziv will also be paid more than double the normal severance pay. Under the terms of his contract, he will receive 220% of his monthly salary for each of the six years he served as CEO and 250% of his monthly salary for each of the 29 years he worked at Hapoalim in various positions.

Ziv ended his employment at Hapoalim Thursday, about three months after tendering his resignation, which sparked a dispute between supervisor of banks Rony Hizkiyahu and Fischer on one hand and controlling shareholder Shari Arison on the other. In 2008 Ziv's wages cost Hapoalim NIS 3.5 million, of which NIS 2 million was salary, while the rest was bonuses and perks. His last monthly salary was NIS 167,000, such that his total compensation package is NIS 14.3 million. The bank has the option of waiving the cooling-off period at Ziv's request.

In February 2008, a few months before Hapoalim sold its mortgage-backed securities portfolio at a loss of $1.3 billion, the bank's board approved options allocations of 1.14 million warrants for Ziv, convertible into shares at NIS 16.30 per share and 825,000 warrants for Dankner, with an exercise price of NIS 16.40. The warrants cannot be exercised for two years from their allocation date, and are valid for two years thereafter.

Hapoalim shares are currently trading at NIS 10.11, so Dankner and Ziv would have no reason to exercise their warrants. If the share price rises above NIS 16.30 in the next two years, however, these warrants could be worth several million shekels.

No comment was available from Hapoalim.