Economic Concentration Panel Submits Interim Recommendations to Netanyahu

Advises separating major financial and non-financial holdings within four years.

The government-sponsored committee that has been examining concentration of economic power in Israel submitted its interim recommendations to Prime Minister Benjamin Netanyahu on Monday - almost a year after it was appointed.

Much of the report relates to the suggestion that several corporate holding companies that have interests in both the financial sector (such as banks, in insurance companies and investment firms ) and in other so-called real business enterprises, including communications companies and retailers, be given four years to end their interests in both sectors.

The committee proposed a relatively high threshold for the requirement to divest, meaning that it would only affect financial firms managing assets of more than NIS 50 billion and non-financial holdings in companies with sales of more than NIS 8 billion, or a corporate balance sheet of over NIS 20 billion.

If the recommendations are finalized, they will affect Nochi Dankner, the controling shareholder of the IDB group, Yitzhak Tshuva, who controls the Delek group, and Zadik Bino, who has non-financial interests that include the Paz Oil company as well as an ownership stake in the First International Bank of Israel.

IDB's holdings include non-financial interests in the Cellcom cellular firm, Super-Sol supermarkets and Nesher Cement, as well as a stake in the Clal Finance firm. Tshuva's Delek group controls a range of non-financial business interests in addition to Phoenix Insurance and the Excellence investment firm. Dankner and Tshuva would put their insurance companies up for sale and Bino would have to choose to retain ownership of either Paz or First International Bank.

The economic concentration committee was also charged with coming up with recommendations vis-a-vis the pyramid-type corporate structure of many Israeli consortia that allows a controlling shareholder with a major stake at the top of the corporate pyramid to exert control lower down with a relatively small investment. On this score, however, the committee did not propose any drastic changes.

The panel proposed allowing for the continued existence of these corporate pyramids, albeit subject to certain limitations, such as strengthening the influence of minority shareholders in companies controled by the major corporate holding firms on issues such as executive compensation and major business decisions.

The panel also suggested that concurrent service on the boards of directors of financial and non-financial firms be barred and that the antitrust commissioner be given increased authority in this area.

In the wake of the social protests that swept the country over the summer, the committee came under pressure to publish its recommendations. The recommendations were presented by panel chairman Haim Shani, the outgoing director-general of the Finance Ministry, who will remain in his post until final recommendations are made as well. The committee will hold public hearings that will include giving the right of reply to companies that would be affected by the proposals.

The leaders of the social protest movement have convened their own panel of economic experts who said Monday's recommendations were too little and too late. Although they welcomed the suggestions, they said the proposed changes addressed the problem in only a very partial manner. They also expressed doubts that the recommendations would lead to increased competition to such an extent that it would lower the cost of living substantially.