Three years ago, when it was decided to appoint a rotating chairman of United Mizrahi Bank, it was already apparent something was wrong with the decision making of the bank's controlling shareholders. A bank board of directors is not a national unity government - there is no place for short-term appointments that hamper long-term planning.
Control of the bank is divided between two groups - the Ofer family holds 26 percent of the share capital and the Wertheim-Feinberg group another 26 percent. In 1998, it was decided that Avi Wertheim (the nephew of Muzi Wertheim, one of the controlling shareholders) would be appointed for two years as chairman of the board, and would then be replaced by a candidate of the Ofer family. The two sides decided any candidate must be acceptable to both groups.
Wertheim's term as chairman ended at the beginning of 2001 - he announced his departure, but withdrew it after the controlling shareholders failed to agree on a replacement. This stalemate came about despite the Ofer family proposing a number of candidates, including Professor Yaakov Ne'eman, Liora Meridor, Avraham Beiger, Yair Rabinovich, Zvi Efrat, Aryeh Zeif and Joseph Ciechanover.
In recent months, the bank has been running without a real chairman at the helm. Wertheim knows his term is over, but with no successor he has not yielded his seat.
The disagreement over the appointment of a chairman has destroyed the relative harmony with which the bank has been managed in recent years and has created two opposing camps on the board of directors.
The bank's CEO, Victor Medina, is making great efforts to avoid this turmoil and keep the bank out of this fray, but he has not always succeeded in this mission. The Wertheim group already regards him as belonging to the Ofer camp.
A dispute between the bank's controlling shareholders would not be particularly disturbing, so long as it did not spill over to the everyday management of the bank. But it appears that the dispute is indeed liable to affect the bank's daily operations.
One example of this negative impact may already be seen in the lack of cooperation between the bank and its Bank Tefahot subsidiary. There is great business potential is such cooperation, especially in this period of streamlining in the banking industry. Nonetheless, the shareholders have not been able to achieve this cooperation.
The United Mizrahi Bank is showing good performance, but the dispute between the shareholders is harming its long-term planning and investments. This may be due to the fact that some of the shareholders are interested in selling their holdings. The Ofer family has recently held talks with Citibank and the Migdal insurance company on selling its Mizrahi stake.
The only advantage in all of this is that the suspicion and lack of trust between the two controlling shareholders will make them follow each other's actions more closely and thus reduce the possibility of entering into dubious transactions.
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