The timing of Mizrahi-Tefahot CEO Eli Yones’ announcement last week that he will not renew his contract with the bank when it expires - on April 1, 2014 - made for a lot of head-scratching. Eleven months is a very generous amount of lead time for anyone. Board members, speaking confidentially, explain that while Yones' employment ends officially when his contract does he will effectively step down as CEO within four months.
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Why the gap of around seven months between Yones' effective and official retirement dates? To allow him to take advantage of all his paid vacation days, basically. He will collect his regular salary and benefits for around four months, after which he will effectively step down.
Yones has told his board he intends to quit as soon as his successor is named. But after that happens, presumably around August, he still has a serious backlog of vacation days coming to him. In Yones' nine years as CEo he earned 25 paid vacation days a year.
The termination date of Yones' employee-employer relationship with the bank is a NIS 18.8 million question. According to his most recent contract, signed in November 2008, the fifth and final tranche of Yones' stock options will vest if he does not resign before the contract ends, on April 1, 2014.
This tranche comprises 1.1 million options at a (dividend-adjusted) exercise price of NIS 19 per share. At the current share price of NIS 35.90 the naïve value of the fifth tranche (the current share price minus the exercise price, multiplied by the number of options) is NIS 18.8 million.
Yones timed his retirement announcement so that he can effectively step down as CEO within a few months without forfeiting his vesting eligibility for the final tranche of share options.
After his contract expires Yones will be eligible for a three-month adjustment period, at full pay, which will also be considered the cooling-off period during which he cannot work directly or indirectly for the bank's competitors.
In his most recent contract Yones requested, and received, a reduction of the cooling-off period from six months to three months.