The Weisglass Touch

April 4 was a particularly hectic day for Yoram Danziger. At 8 AM, the lawyer received a visit from former banker and financial adviser Menahem Inbar. Inbar, who had been business manager for Mori Arkin, one of the owners of Bezeq (TASE: BZEQ), is also a director at the national phone company. The meeting followed Danziger's appointment to investigate questionable accounting practices at Bezeq, especially concerning allocation of stock options.

Danziger spent the rest of the day meeting at the frantic pace of one an hour, with a long list of Bezeq managers, former and incumbent; with the company's controlling shareholder Haim Saban; with CEO Jacob Gelbard; with chairman Dov Weisglass; and with external director David Bloomberg.

At 20:30, Danziger held his last meeting of the day, with Bosmat Chelouche, Bezeq's general counsel.

All in all Danziger spent about a month vigorously investigating affairs at Bezeq. What he found was, in truth, general knowledge to anybody familiar with the Bezeq board of directors, and the conduct of companies like it.

Sign here and here and here

When it came to delicate and truly important matters such as handing over tens of millions of shekels to a tiny clique of executives, the directors were simply trampled. The mechanisms for stock options and bonuses were, in practice, closed in direct meetings between the company's managers and representatives of the shareholders. At best the directors were asked to serve as a rubber stamp approving the agreements that Gelbard initiated, which had received the blessing of the controlling shareholders. 

Gelbard acted decisively, not even involving the general counsel or the human resources manager, for fear that they'd leak details of employment agreements signed with other executives.

If you thought that privatization necessarily improved management quality, kindly stand corrected. Read Danziger's report and see how badly management deteriorated at the giant company, in the private hands of the financial geniuses from abroad.

According to Danziger's findings, the company behaved more like the Histadrut labor confederation during the bad old days, than a modern telecommunications company.

Jacob Gelbard has paid dearly for his controversial conduct. He may not be able to come back to the company, and make the tens of millions a year virtually assured for him, albeit through dubious practices.

Not all Gelbard's fault

But the Danziger report points at a whole list of problems, for which Gelbard cannot fairly be held responsible. How is it that the directors received the material based on which they were to approve (or deny) the executive remuneration plan, shortly before the meeting? Moreover, it was taken back right afterwards. The directors had zero chance of seriously studying the proposal they were being asked to okay.

And, why was a decision this sensitive in nature taken without the presence of the general counsel? (Sources on the  board: "Gelbard asked her to leave the meeting for the sake of the right to privacy".)

Who let the shareholders conclude a pay deal with representatives of the board and CEO, though wages and bonuses are the business of the board? (Sources on the board: chairman Weisglass was absent because he wanted to take part in the 'Saban forum' taking place at the same time in California".)

The main party responsible for this kind of behavior is precisely the chairman. From October 2006, the chairman is Dov Weisglass.

Everybody knows the amiable, charming and nimble lawyer "Dubi" Weisglass. Though he's leader of one of Israel's four biggest companies, he came to the job with absolutely no prior experience in managing big companies. Weisglass developed into a talented lawyer for the white-collar group, and for years lived in the seam between vast wealth and great power.

His business experience was confined largely to liquidations. He spent years liquidating the Hasneh insurance company, based on a court appointment.

Weisglass loses his touch

The more trouble the Sharons got into, the closer they became transaction the uber-lawyer. Weisglass became one of the closest associates of former prime minister Ariel Sharon, even becoming his bureau chief and official representative in sensitive negotiations the world wide.

The new owners at Bezeq had done their homework on Israel's business environment and culture. They realized they needed somebody who knew his way through the corridors of power.

Bezeq is a company subject to close supervision. It is therefore highly vulnerable to regulatory decisions. The regulator's decisions to ease or crack down are more critical to it that this or that efficiency plan or breakthrough deal.

The new owners saw Weisglass as the ideal macher, or fixer, and the appointment worked well for the man, too. He didn't  have to work at Bezeq full-time: an 80% position left him free time to engage in his other occupations, while still receiving the extraordinary sum of NIS 3 million a year, plus stock options (which have been frozen for the nonce) worth millions more.

Yet top sources in the know at the phone company grouse that Weisglass hardly worked wonders in the area for which he was recruited. Olmert's people cleared the Prime Minister's Office of people affiliated with Arik Sharon, costing Weisglass his main power as macher. Nor is Weisglass any associate of Communications Minister Ariel Atias.

Moreover, so far Bezeq has failed to obtain any of the regulatory reliefs to which it aspired. The Communications Ministry refused to let it complete its merger with Yes satellite TV company. It won't let it tear down the Chinese walls between Bezeq and its subsidiaries. It refuses to let Bezeq-Yes provide video on demand. And that's a truncated list of Bezeq's requests in the last year.

We may assume that Danziger won't be recommending Weisglass be fired, through the chairman views himself as bearing "ministerial responsibility" for the flaws exposed during his term, even if he is not directly to blame. But the occasion of Danziger's interim report is occasion enough to look hard at the qualities that the Bezeq chairman really needs.