State Backtracks: It Won't Support Bank Discount Stock Options

State Comptroller urged treasury officials to retract letter promising not to object to giant perk

Spurred by the state comptroller, the state is reversing its position: it will oppose the gargantuan stock options perk offered to top management at Israel Discount Bank (TASE: DSCT).

Esentially the state is revoking the letter in which it committed the government not to object to the huge benefit package.

The proposed bonus and options package included some NIS 70 million for CEO Giora Offer, and the bank's chairman, Shlomo Zohar.

The accountant general at the Finance Ministry, Yaron Zelekha, is the one who gave the letter to Discount. He was subsequently lambasted in the court of public opinion.

The letter's revocation is viewed as Zelekha admitting his mistake - for not objecting in the first place to the enormous bonus package.

His explanation at the time was that the state was not harmed by the agreement, and, therefore, he saw no reason to object.

In choosing to support the deal, Zelekha ignored the public aspects of granting such incredible benefits and salaries to bank managers.

The implications of the Discount agreement - as well as those at Bank Hapoalim - aroused a terrific storm in the public and the media.

The letter was retracted following intervention on the part of State Comptroller Micha Lindenstrauss.

Yesterday, Lindenstrauss, Zelekha, the Supervisor of Banks Yoav Lehman, and the head of the Israel Securities Authority, Moshe Terry, held a meeting at the comptroller's office.

The meeting was a result of the investigation by the comptroller into the decision-making process in the accountant-general's office that resulted in the issuing of the letter supporting the benefit proposal. In fact, the investigation was really into the lack of opposition to the agreement that was viewed as tacit support by the state in granting the bonuses and options.

The meeting was held as part of an effort to agree on a uniform policy for the state in dealing with the issues relating to bank salaries and benefits.

One of the important decisions made at the meeting was to revoke the previous letter of support.

In any case, it seems that the letter has lost its relevancy in the meantime.

In light of the public outcry over the enormous handout to senior management, along with the comptroller's intervention, Discount's owners and management have already put a stop to the approval process.

For now, Discount's management is attempting to receive approval for only that part of the package benefiting the bank's vice-presidents; but not those for the chairman or CEO.

In this case, the bank does not need approval from the state to grant the benefits; but it is believed that at some point in the future, the bank intends on raising the issue of bonuses and options for the chairman and CEO, and then the state's stand will once again be relevant.