Is there logic to the view that Galia Maor is precluded from moving from the post of Bank Leumi chief executive to that of board chairman? If we judge according to common practice in Israel and abroad, the opposite is true. In many successful companies, a veteran CEO becoming chairman is considered a fitting way to ensure generational change while preserving strategic direction, professional expertise and the trust of investors and clients.
The board of directors lays down strategy for a company and oversees its implementation. However, both common practice and the Companies Law did not deem it necessary to prevent a CEO from serving on the board. It also did not prevent a CEO moving over to become chairman. The idea that Maor is precluded from serving in that position seems unfounded and harmful, just as if we were to say that Eli Hurwitz cannot be Teva's chairman after having served as CEO, a post from which he led the drugmaker to impressive success and won the trust of investors.
Is there a difference between a non-financial company and a bank on this issue? It turns out that there is not. According to the Bank of Israel's instructions, Maor can be a board member while she is CEO, and certainly when she ceases to serve in that position. The Bank of Israel's instructions forbid employees at a bank from being board members, with the exception of the CEO, whose membership on the board is permitted. We should inform the people in the press who have questioned why the Bank of Israel is keeping quiet about Maor's possible candidacy as Leumi chairman that the Bank of Israel has not remained silent. Its response can be found in its instructions on sound banking practices, which permit a move from CEO of a bank to a place on the board, even as chairman.
Quite a few talented and experienced people are available, but if one takes into account what is acceptable in successful companies and what the Companies Law and the Bank of Israel's guidelines stipulate, it's clear that Maor's candidacy for chairman is entirely appropriate. It ensures the appointment of a person with a proven administrative record at the bank, one deeply familiar with all its operations who has the long-standing trust of its depositors and the capital markets in Israel and abroad. She also enjoys a great deal of prestige in the industry. Had it been necessary to replace the management of Bank Leumi (as was the case at Bank Hapoalim), it would have been logical to prefer an external candidate for the position. But anyone seeking stability, continuity and professionalism should prefer - just as Leumi's Shares Committee responsibly did - that Maor remain at the helm of the team that leads the bank.
Choosing Maor as bank chairman, therefore, does not pose a problem in terms of sound management (the Companies Law), or from the point of view of the Bank of Israel's instructions. Those who oppose the choice of Maor on the grounds that a conflict of interests exists between today's supervisor (the board of directors) and yesterday's executive (the CEO) should be told that both legislation and business practice do not view this as a problem. Those who oppose the choice of Maor on the grounds that management, as distinguished from the owners, is taking over control of the company, certainly cannot find support in any article of the law. In any event, the choice of Maor as chairman would not be "taking over control of the bank" because control is a separate matter. These two excuses are merely a populist way of throwing dust in the eyes of the public and should not be part of the discussion.
Why then is there a problem? Because we are dealing with a bank that - uniquely - still has a shares committee set up on the basis of the Bank Shares Law of 1993. One of the three aims of this law was to prevent government intervention in running the banks. The law also states that candidates for a bank's board who are proposed to shareholders by the Shares Committee have to be as qualified as public directors. They have to undergo a two-year cooling-off period if they have served in a managerial position at the bank. However, the Shares Committee also followed the instructions of the Bank of Israel, which state that only one quarter of board members - not all of them - must, as public directors, meet the tougher eligibility conditions. Perhaps the committee saw a way of advancing Maor's candidacy by relying on the Bank of Israel's stipulations.
The Finance Minister announced that the government would sell its shares in Bank Leumi by the end of 2009. He later postponed the date, but it's clear that there is a very short timetable for the Bank Shares Law to remain in force, and that is how it ought to be. It will be regretful if, because of a constellation of technical circumstances, Bank Leumi will be prevented from effecting generational change in its management while preserving its most proven managerial assets, the most significant of which is Galia Maor.
The writer, the publisher of Haaretz, has business ties with Bank Leumi in finance, advertising and subscriptions.
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