Israel's Leading Bank Chastised for Handling of Sexual-harassment Complaint

Bank supervisor orders head of audit committee to step down, but takes no other action against Bank Hapoalim

The logo of Bank Hapoalim is seen at their main branch in Tel Aviv, Israel July 18, 2016. REUTERS/Amir Cohen/File Photo
AMIR COHEN/REUTERS

Bank of Israel Banks Supervisor Hedva Ber on Tuesday ordered Bank Hapoalim to remove Dafna Schwartz from its board’s audit after concluding the lender’s handling of a sexual-harassment complaint had been mishandled.

The move came after a report chastizing Hapoalim management for its handling of a complaint against former CEO Zion Kenan. While the report said that on the whole Hapoalim had acted in accordance with the laws to prevent sexual harassment, some aspects of the case were mishandled.

“We were impressed that on the level of the law for preventing sexual harassment, the bank acted properly. However, our examination revealed that the bank’s handling of it was not transparent ... and was carried out in a manner not in line with the banks supervisor’s directive and the rules of proper corporate governance,” the central bank said.

Specifically, the report singled out Yair Seroussi, who was chairman of the board at the time, and Schwartz, head of the audit committee, for not informing the board or the banks supervisor of the incident. Israeli banks are required to disclose such matters to regulators as they could disrupt the running of the bank.

The report did not mention any Hapoalim executives by name, saying only that it investigated a complaint against the CEO who was serving in May 2016. The job at the time was held by Kenan.

The employee, who has since left the bank, claimed she was harassed by Kenan at a hotel during a business trip to Almaty, Kazakhstan in December 2006. As a result, Hapoalim paid the employee 6 milion shekels ($1.7 million) and Seroussi stepped down as chairman when the incident was revealed.

On Tuesday, the Bank of Israel said it would take no action against him since he is no longer at Hapoalim, adding that Schwartz would be able to remain a director.

Ber conducted the investigation into the affair after Hapoalim failed to notify her about the complaint. The case was also investigated by Israeli police, which closed it in August without bringing criminal charges against Kenan.

Ber said Hapoalim will be required to strengthen its corporate governance and policies on conflict of interest and set a clear policy on complaints against senior bank executives.

Hapoalim said it was studying the report and would act on its recommendations. Seroussi said he acted on the basis of legal advice he received at the time and noted that he had joined the bank’s board three years after the incident occurred. “I acted in good faith and the best interests of the bank,” he said.