Taking Stock / CEO-less and Fancy-free

How long does it take to appoint a CEO to Bank Hapoalim?

More time than it takes to initiate a new investment fund, to consolidate its business model and strategy, to kick off its first show to investors and to garner preliminary commitments to invest $75 million, evidently.

Last Friday, exactly four months had passed since Eli Yones declared he was renouncing the rare pleasure of working with Shlomo Nehama, Danny Dankner, Scott, and all those other directors constantly sticking their noses into the management of the nation's biggest bank.

It is amusing, really. In four months the bank's shareholders haven't even marked a consensus candidate, but meanwhile Yones, who's still acting as CEO, has managed to start a whole new project from scratch and to report progress in raising capital for a giant investment fund. And that is no mean feat these days, in the current economic situation.

This business of choosing a new CEO for Bank Hapoalim has turned into a farce. Each week we get a new item of news - Shy Talmon has been chosen and will take over any day. No! It's Zvika Ziv, or some guy from abroad. Then we hear that the board is leaning toward a surprise candidate.

But then the process of naming a CEO for Bank Hapoalim has always been farcical. Yones' appointment was just as embarrassing. For half a year Shlomo Nehama and Danny Dankner moiled and toiled and cooked up the ouster of Amiram Sivan, though actually the veteran banker only bit the bit and quit after months of relentless leaks.

Is there a dearth of seasoned managers in Israel? No, no, there are all too many out there looking for work, and Bank Hapoalim itself has at least two people worthy of the task.

Political delay

There are actually many reasons behind the delay in naming a new CEO, but they boil down to one main one: politics. Each of the directors, representing the shareholders, has a different agenda. One wants to assure he remains the strongest figure at the bank. Another wants to retain the reins at the U.S. subsidiary, Signature Bank. A third wants to ensure he retains some control after the appointment of a new CEO, while a fourth doesn't have a clue what he really wants, but he has advisers who know very well what they want.

Is any harm really done by the protracted haggling? Bank Hapoalim is like a giant aircraft carrier, whose speed and momentum and direction would dominate this or that CEO.

But Bank Hapoalim has a tremendous asset - a giant army of small customers that generate it income of billions of shekels, come hell or high water, through its provident funds, mutual funds, credit cards and fees for basic actions.

Shlomo Nehama cannot claim credit for that asset, nor could Amiram Sivan. Their specialty was granting huge loans at negligible interest rates to rich people.

No, the one who turned Bank Hapoalim into a superpower among the small was Jacob Levinson, who harnessed the vast power of the Histadrut labor federation in the `70s and `80s to make Hapoalim the biggest bank in the nation.

Gigantic it may be, yet the board's behavior at Bank Hapoalim is decidedly bizarre, from their raging urge to meddle in every aspect of the bank's management, to the underhand efforts of some of the directors to leverage their influence for the greater good of their own private business.

Hapoalim isn't the only bank in Israel whose directors are engaged mainly in power struggles. Much the same happens at United Mizrahi Bank and Union Bank of Israel, but Hapoalim is the biggest bank in Israel, it plays a key role in the economy and nation, it is the most important source of credit in the country, and it is heavily influential in the business sector.

The shareholders' behavior regarding the election of a new CEO could say awful things about the results of their involvement in the bank, and their expectations of the new CEO to be.

Shackling Lehman

A few weeks ago, Bank Hapoalim's shareholders went to war against the Bank of Israel's Supervisor of Banks Yoav Lehman.

Lehman wanted the government to grant him the power to veto any appointment or managers and directors at the banks. Horrified, the banks protested that his veto would undercut their intellectual rights and hamper proper management.

They are right: the supervisor's power to meddle with the banks must be limited. Excess regulation can trigger serious side effects that could ultimately increase the risks the bank managers undertake.

But before that, much clearer boundaries must be imposed between Bank Hapoalim's shareholders and its management. Because, with all due respect to the stock, which they bought with their own money (or money borrowed from Bank Leumi), the NIS 300 billion over which they hold sway through the bank isn't theirs; it's ours.