The Lessons of Uri Shenar

That night, they had their photo taken together, smiling and cutting the cake celebrating Keshet's victory in the Channel 2 tender. In the morning, when Uri Shenar went to work as president of Keshet, he discovered that he was history. Or about to be: the board of directors had started steps to depose him, and replace him with his partner to the photo-op, superstar CEO Avi Nir.

The long lawsuit in which Shenar tells his sorry tale, of his ouster from the No. 1 television company in the land, is recommended reading for all directors and shareholders in Israel's publicly traded companies.

It is a lesson in how not to run a company. It is a tutorial in how ego battles can take over and destroy tremendous value for shareholders. It has other lessons to teach, too:

1. For the last three years, Shenar had been one of the best-paid employees in Israel. In 2004, his pay amounted to NIS 9 million, from NIS 6 million in 2003. In 2002, a year of crushing recession, he settled for NIS 5 million.

TheMarker exposed these sums half a year ago. The day after the story broke, "top Keshet people" spoke to other newspapers, claiming the amounts were inaccurate.

Shenar's lawsuit proves that in fact, the sums had not been accurate. In 2004 he didn't get NIS 7.4 million as TheMarker wrote: he got just NIS 7.337 million.

The next time a company denies a report in the paper, claiming it to be "inaccurate", one should keep in mind what it actually means.

2. Most managers are driven by ego and prestige. Money matters, to be sure, but it can never fully compensate for a bruise to the ego.

The Keshet board lavished more and more millions on Shenar, and Nir, each year. But all those many millions couldn't relieve, even a little bit, the tremendous friction between the two men.

Nir felt that neither he nor the company needed Shenar any more. He wanted independence.

Shenar felt that after all those years, the company owners were turning their backs on him.

Even salaries costing the company NIS 10 million to NIS 15 million a year couldn't make those two work together nicely.

3. Image is nothing. Ignore the façade that corporate management sells to the press. For ages Keshet had pooh-poohed reports of management trouble at the top, shrugging it off as baseless gossip. In his lawsuit, Shenar reveals that the Keshet management structure had been broken for months, that he, the president, and the CEO were not on speaking terms, and that the board spent months trying to bridge between them, in vain.

4. One of the board's main jobs is to handle succession at the top. A flawed procedure as happened at Keshet can exact a terrible cost. The owners can wind up being forced to spend millions on redundant positions and to waste its time on inner-court intrigues instead of creating strategy and seeking business opportunities.

5. When it comes to television, the rules governing the shareholders change. Mozi Wertheim agreed to pay his two hired managers roughly the highest salaries in town, from NIS 4 million to NIS 9 million a year for Shenar, and similar sums for Nir. There are other hired managers who earn comparable sums, but not at small companies like Keshet, where the managers' pay ate a third of profit.

The Keshet board was prepared to do practically anything to win the Channel 2 tender. It offered the state a franchise fee of NIS 170 million, which will swallow profit for years to come.

Why are the Keshet shareholders so willing to scatter money like that? Apparently it has to do with power, prestige, and contacts; because their money is made in other places entirely.