Outgoing TASE Chairman: I Didn’t Want to Stay in a Job Where I'm at War

In an interview with TheMarker, Sam Bronfeld explains why he’s stepping down and warns of the dangers of over-regulation.

Sam Bronfeld, 71, announced last week that he was stepping down as chairman of the Tel Aviv Stock Exchange, just a week after TASE’s CEO Ester Levanon said
she also planned to leave. Bronfeld was quite explicit in blaming his decision on Shmuel Hauser, the chairman of the Israel Securities Authority, accusing Hauser of interfering excessively with TASE management.

Was your decision to step down brewing for a long time or was it taken because of Hauser's letter to the board demanding that you be kept out of the search process for a new CEO?

Bronfeld: "I'm not the first manager or the last in the State of Israel to suffer under the weight of regulations. Things intensified and my being disqualified from the search committee [showed]that the regulator didn't want me to remain in my position. I didn’t want to waste the remaining years in a job where I'm at war with Hauser. I never worked in a place where I wasn't wanted. To begin adapting to a situation where a powerful regulator wants me out doesn't sit well with me.

“I hope that whoever comes in my place will not have the same thing happen to him as to Ester and to me. I hope that he will start with a little more cooperation and less baseless accusations and less interference in the management of the stock exchange."

The media report that Hauser told Levanon she had to step down, but she never reported that. What really happened?

“The chairman of the ISA called the CEO of the bourse to resign. He threatened that he would write a letter to the board of the TASE that would lead to her being fired if she didn't agree to resign of her own accord. Ester decided not to play this game and presented her resignation.”

Some believe she quit because of unflattering things you were saying about her.
"I prepared a performance review on Ester that ran to five pages. To evaluate a CEO is not a simple matter. When you evaluate a manager, you need to show strong and weak points. Someone did something outrageous and leaked the most confidential parts from the discussion we had on my evaluation of Ester.

"The discussion was entirely ordinary. It wasn't a critical report but something ordinary of the kind always discussed by control committees. It was routine practice. In my evaluation I wrote that Ester's performance as a bourse executive was good .... On the part dealing with interpersonal relations she received a lower assessment … The media took the average of these two assessments and wrote that she received an average grade.

"I want to stress: Ester led the biggest revolution in the history of the exchange – computerization of trading and closing the old trading floors … I think the capital market owes her a great deal of thanks for the excellent work she did. ."

What were your central claims against Hauser and other ISA?

"I contend that there is a problem of excessive regulation. We hear this from the corporate sector, from investors and from portfolio managers."
Give us an example of what you're talking about?

"I read the newspapers and see Dan Proper openly declaring that he wants to de-list Osem from the stock exchange. I see that Gil Schwed says that he won't bring Check Point to the stock exchange to be traded and warns other high-tech people to stay away as well. I read that Akiva Moses [the former CEO of Israel Chemicals] is complaining about regulation and likewise Dan Goldstein [controlling shareholder of the Formula Group]. All these people are crazy? "

But they are all executives and controlling shareholders with concrete interests. Maybe for investors the regulations are good?

"If investors think regulations are so good overseas, they should go there. We've seen how wonderful the regulatory environment abroad was …

"Excessive regulation comes in two ways. The first is coming up with a cure for the Israeli patient that is really designed for treating a sick American ... An extreme example of that in Enron, whose managers gained control of it, appointed their friends, falsified reporting and gave themselves bonuses. The Americans understood the problem and legislated Sarbanes-Oxley in 2002 to deter cheating and exploitation by executives. The problem is that the Israeli regulator adopted the same idea despite the fact that the model here is entirely different.

"A large part of regulation, which is designed to neutralize the power of controlling shareholders and to empower minorities, has caused more damage than good. I know there is some benefit and controlling shareholders are not all saints. But the starting-off point of regulation is that controlling shareholders try to raise capital in the stock exchange in order to exploit the shareholding public and that is a problematic way of looking at it. If that is how they see it, they should shut the stock exchange altogether immediately because it has no value."
 

Ofer Vaknin