Jacob Perry Leaves Behind a Den of Discord at Mizrahi Tefahot

Regulators are about to submit a critical report on the bank's governance as changes at top erupt into a power struggle.

Sivan Aizescu
Sivan Aizescu
Send in e-mailSend in e-mail
Sivan Aizescu
Sivan Aizescu

Just as Jacob Perry is readying to step down as chairman of Mizrahi Tefahot Bank to enter the political ring, the Bank of Israel is set to submit a sharply critical report on the bank's corporate governance.

The central bank's draft report to the bank directors is expected to find fault with their performance, similar to a previous report from January 2010.

In the view of some directors, Perry - who announced last week that he will be joining the Yesh Atid list, headed by Yair Lapid, in the upcoming Knesset elections - has become increasingly ineffective as bank chairman over the past few months. Some accuse him of leaving a void and effectively allowing CEO Eli Yones to usurp his role.

One example cited by some has to do with a set of scathing letters sent by Yones to two directors, former Finance Minister Avraham "Beiga" Shochat and Dov Mishor, berating them for serving simultaneously on the board of Carasso Motors - and demanding their resignations.

Carasso is a client of Mizrahi, and Yones claimed the two directors' dual roles complicated the bank's business dealings with Carasso.

Despite the view that Yones' involvement in the matter constituted blatant interference with the board, the Bank of Israel is nevertheless likely to conclude that guidelines must indeed be set that limit the freedom of bank directors to serve on the boards of companies dealing with the same bank.

In any case, Mizrahi directors saw fit to grant Perry bonuses of NIS 1 million in 2010 and NIS 1.1 million in 2011, "in consideration of the chairman's great contribution in implementing corporate governance principles at the bank, and for the proper and efficient performance by the bank's board of directors," as explained in the bank's financial statements.

Biting criticism over the board's corporate governance in the central bank's 2010 report tells a different story, with the board portrayed as a rubber stamp for decisions made by Yones "without any discussion of fundamental questions."

"The investigation disclosed that there are directors, including the chairman, whose influence on decision-making isn't exercised at board meetings but rather in closed meetings with the CEO and other members of management," the report said. "It would be appropriate that board members be party to decisions and not serve as rubber stamps for decisions already made."

Indications are that the forthcoming Bank of Israel report will contain more of the same. It will be noteworthy whether or not this report will again serve as the basis for Mizrahi's board justifying another fat bonus for the chairman.

Similar findings were reported at Bank Leumi in 2009. The banks supervisor at the time, Rony Hizkiyahu, found that Leumi management, headed by Galia Maor, confined discussion and decisions to those that interested them and would often present a single alternative for the board to either approve or reject. Bank Leumi's chairman was also granted bonuses at that time.

Hizkiyahu decided to keep those audits from the public, and the banks obliged. The Mizrahi and Leumi reports came to the attention of TheMarker only afterward, and it is unclear whether there are others that haven't been revealed. The decision to keep them under wraps allowed the bank chairmen to continue collecting exorbitant pay with no one outside the Bank of Israel any the wiser.

Changing of the guard

Sources familiar with the balance of power at Mizrahi say discord among directors is being driven by issues related to the bank's new guard of controlling interests, particularly since the death of Yuli Ofer in September 2011. Ofer held half the controlling shares in Mizrahi through Ofer Investments.

The battle over inheritance between his children Liora and Doron Ofer still hasn't been resolved, and the issue of who controls Ofer Investments, which also owns a majority in real estate developer Melisron, could take years to settle in court. Meanwhile, each of Yuli Ofer's children holds a 15% stake in Ofer Investments, with cousin Eyal Ofer owning 33% and 36.66% controlled by the estate administrator, attorney Zvi Ephrat, who also serves on Mizrahi Tefahot's board.

Several months after Yuli Ofer's death, 82-year-old Mozi Wertheim, who owns the other half of Mizrahi's controlling shares, announced he would be transferring 63% of his shares in Central Bottling Company,

Mizrahi Telafot CEO Eli Yones, right, and chairman Jacob Perry. Credit: Ofer Vaknin



Automatic approval of subscriber comments.

Subscribe today and save 40%

Already signed up? LOG IN


Palestinians search through the rubble of a building in which Khaled Mansour, a top Islamic Jihad militant was killed following an Israeli airstrike in Rafah, southern Gaza strip, on Sunday.

Gazans Are Tired of Pointless Wars and Destruction, and Hamas Listens to Them

Trump and Netanyahu at the White House in Washington, in 2020.

Three Years Later, Israelis Find Out What Trump Really Thought of Netanyahu

German soldier.

The Rival Jewish Spies Who Almost Changed the Course of WWII

Rio. Not all Jewish men wear black hats.

What Does a Jew Look Like? The Brits Don't Seem to Know

Galon. “I’m coming to accomplish a specific mission: to increase Meretz’s strength and ensure that the party will not tread water around the electoral threshold. If Meretz will be large enough, it will be the basis for a Jewish-Arab partnership.” Daniel Tchetchik

'I Have No Illusions About Ending the Occupation, but the Government Needs the Left'

Soldiers using warfare devices made by the Israeli defense electronics company Elbit Systems.

Russia-Ukraine War Catapults Israeli Arms Industry to Global Stage