The Bottom Line / Say bye-bye nicely
The dispute between the Wertheim and Ofer families, controlling shareholders in United Mizrahi Bank, looks like a personal, emotional battle for power.
The dispute between the Wertheim and Ofer families, controlling shareholders in United Mizrahi Bank, looks like a personal, emotional battle for power. For years, the families have been at odds, and any disagreement between them turns into a "World War" that damages the bank. Although disagreements between shareholders are legitimate, at Mizrahi they do not indicate pluralism or in-depth discussions, but power struggles, sectarianism and emotionalism.
Mizrahi's business situation relative to the rest of the sector is good; but under the current economic conditions, that stability could disappear overnight. The collapse of Industrial Development Bank is a painful example of how quickly a bank can simply evaporate if the public loses confidence in its managers and shareholders.
The current dispute centers on CEO Victor Medina's continued tenure and is impacting a few other decisions. The Ofer family would like to sign a three-year, $4-million contract with Medina. The Wertheims are vehemently opposed to this, hoping to show Medina to the door. Disagreement on this is hindering decisions, including the addition of another Wertheim-appointed director (as compensation for what they see as external director Avi Hefetz's identification with the Ofers) and former Cellcom CEO Jacob Perry's appointment as chairman of the board.
The Ofers agree to both of these proposals, contingent on granting Medina a multi-year contract. Medina, himself, would love a new, lucrative contract, but is willing to keep working without one. There is something grating, both morally and financially, about an expensive, flamboyant contract in these times, but that is mostly the shareholders problem. The shareholders will do as they please and grant, or not grant, the contract.
Linking Perry's appointment to Medina's contract is the gravest fact. Mizrahi can live temporarily without a chair and no disaster will befall it. More worrisome is the depth of hostilities and rivalry between the two controlling shareholders, painting the work of the board of directs as immaterial and motivated by extraneous considerations. This was also evident in related party transactions in which the bank purchased Ramat Gan offices.
The Bank of Israel's supervisor of banks has already warned Mizrahi's controlling shareholders, ordering them to resolve the chairmanship issue quickly, but no compromise has been reached yet. In the present situation, it appears there will be no alternative to serious steps against the shareholders, to drive home the message that this is not the time to shake consumer and shareholder confidence in the bank.
The apparent option would be the deposition of at least one of each family's directors in favor of a public director, bidding farewell to a minion on the board. At the current level of hostility, this would be the only way to get professionals onto the board of directors. The external directors would appoint the chair, and they would determine whether to give the CEO a fat contract or a fat kick out the door.
The Wertheims and Ofers should save their emotions for their other business interests, not for a bank that manages the public's money; because should it wobble, the entire public will pay the price.