Bank Hapoalim's Flags

Bank Hapoalim chairman Shlomo Nehama doesn't understand why he's being so reviled. So he received NIS 23 million in pay for 2005 - well, he admitted right off the bat that it was a deviation that would be corrected. Indeed, within a month he pushed through a resolution that would reduce the bonuses for himself, CEO Zvi Ziv and vice-chairman Danny Dankner by tens of percent. He said he would, and he did it, without hemming or hawing. Yet he is still under attack.

Now the Israel Securities Authority is demanding documents. The Bank of Israel's Supervisor of Banks is probing into whether everything is as it should be. The press is breathing down his neck. For the first time in his life, Shlomo Nehama is at the eye of a storm and he can't seem to find shelter from the whirling winds.

Even the howls when Bank Hapoalim fired 10% of its workforce, or about 900 people, didn't arouse protests like he's facing now. Of course, back then it was Bank Hapoalim CEO Eli Yones who carried out the cutbacks and the one who took the blows was shareholder Shari Arison. Nehama remained on the sidelines.

But this time, thanks to the bonuses, he's at the forefront. First of all, because he's the bank's chairman. Second of all, because the bonuses were indeed outrageous, and third of all, let's admit it - he blinked.

He blinked

Shlomo Nehama blinked just one week after justifying the remuneration that he and the other executives had received. What he said was: "I wish I had to explain bonuses like this every year."

The question is, why he blinked. Why he retreated. Did he find himself unable to bear the criticism? Was it because the bank is a public institution that should be sensitive to public sentiment? Or is because the bonuses place him and the bank in a problematic situation, businesswise? Or, all of the above?

The statesman capitalist

For years Nehama has been cultivating an image of statesmanship. He is connected to political powers and has been mulling a future in leadership of the land, not just of its biggest bank. He has been known to issue statements on social and economic macro issues. A few months back he wrote an op-ed for TheMarker, about the need to institute a presidential regime and to tackle the problem that rural Israel feels deprived.

In the last month he has learned that it's hard to look statesmanlike when your actions scream of insatiable ultra-capitalism. How can a man taking NIS 23 million in pay for one year seem serious when prating about poverty and the minimum wage?

Nehama isn't the only one trying to seem statesmanlike. Bank Hapoalim itself has styled itself a sort of Education Ministry lite. Its social endeavors are based on values of leadership and patriotism (some would say, patronizingly so). The bank encourages us to read, urges us to visit museums and nature reserves and to hang flags that it sends us with the morning papers from our balconies. All at its expense.

But education goes past reading and loving Israel. The education basket must include achievement and excellence - and restraint and sensitivity. One educative thing the bank could do is refrain from shoving the public's face in its executive pay practices, though it is all perfectly legal.

Bank Hapoalim spends tens of millions of shekels each year on social causes, including through donations to the elderly and needy. These donations are enormously valuable to their recipients, we do not deny it. At the same time, the bank manages to create a feeling of worthlessness among the people who do not need its help.

Israel has hundreds of thousands of people who work hard, yet who will never reach so much as a hundredth of the pay Bank Hapoalim is lavishing on its top brass. Shlomo Nehama and his cronies explain they have worked hard for their money. But Israel is full of talented doctors, army officers, fire-fighters and teachers who work hard too, and won't make NIS 23 million a year. Nor 5% of NIS 23 million a year. Towards them, the bank shows precious little social conscience.

The road to Jerusalem

Shlomo Nehama wants to be appreciated for his decision to cut the bonuses. At least he won't be hurting too much. Two weeks before the media learned that Bank Hapoalim was paying three top people NIS 72 million for the year 2005, Nehama received far far more, when he sold his share in Arison Investments to Shari Arison for $150 million. That is 30 times as much as the bank gave him, yet nobody peeped or demanded explanations.

Why? Because that money is coming from Shari Arison's private pockets, and is going to Nehama's. When the payer is a business that we all support through commissions and interest and fees, it's harder to applaud his good fortune.

Most of the bank's shareholders are the general public. If it collapses, the general public will pay, as happened in 1983.

Most surprising of all to the Bank Hapoalim chieftains was the lack of goodwill in the business sector. One bank chairman said he was surprised that the media let the Bank Hapoalim people get away with these gigantic salaries. A top-tier accountant called it "revolting". Others concluded that the Bank Hapoalim chiefs had gone barking mad.

Were they outraged on behalf of the public? Nonsense. They had the same feeling as the man in the street: they felt belittled, and spat back.

Anyway, Shlomo Nehama acted quickly and decisively, slashing back the bonuses. He may have had not only moral but sound business reasons too: without that he couldn't ethically have continued to streamline the bank and raise the prices the bank charges customers. Also, he precluded the embarrassment of being snubbed: "What's it to give away a few flags, given how much he makes." He couldn't afford to have that kind of anger in the street if he ever wants to become prime minister.