Taking Stock / Learning Arie's Lesson

In the summer of `97, a month before taking office as the new chairman of Israel Discount Bank, Arie Mientkavich met a friend in the Pronto restaurant in Tel Aviv. Mientkavich was then finishing a glittering stint as chairman of the Securities Authority, and his knowledge of the banking scene was minimal.

When his friend mentioned the name Ricky Bachar, Mientkavich innocently replied, "Ricky Bachar? Who's she?" - at which point his friend immediately understood how detached the incoming chairman was from the bank he was about to enter.

Ricky Bachar is a man, not a woman, and a couple of months after Mientkavich took on his new role, he knew very well who the friend had been talking about: the chairman of the bank's workers' committee, the most militant and powerful such committee in the banking sector.

Mientkavich, fresh from the Securities Authority, had no idea what he had stepped into. He was convinced that in Discount he would continue in his vigorous and resolute managerial style, in which he made his way to the top until then.

But pretty quickly, reality caught up with him. Bachar showed him who was the real boss, when Mientkavich tried making decisions on hiring workers with the committee's approval.

Mientkavich immediately turned to a tried-and-true method: reports about Bachar's wages, and those of 11 family members working at Discount Bank were leaked to the press. As soon as the bloated wages and the rampant nepotism were publicly known, Mientkavich was sure, the workers' chairman would be brought low and would not be able to stand up to it.

Of course, that was a mistake. Not one of the 5,000 bank workers was surprised when they read in the papers that the cost of employing Bachar and his kinfolk reached a quarter of a million shekels a month. Actually, it didn't interest them at all. As long as Bachar was out there batting for them and their family members, then they had no problem with him or his family.

After three years at the bank, Mientkavich understood that if he wanted to carry on being chairman, he had to work with Bachar and not against him, and that he couldn't run the bank alone.

Mientkavich will not forget the period when he fought the workers' committee - to this very day he mourns that no one supported him - not the government and certainly not his banking colleagues.

Bezeq CEO Amnon Dick is now learning the lesson that Mientkavich learned. Dick also thought that leaking to the press reports about how the son of workers' committee chairman Shlomo Kfir had progressed through the company would weaken the union boss.

Like Mientkavich, Dick didn't understand that nepotism, promoting friends and deals with committee members are rooted deep in the accepted norms of companies like Bezeq. No Bezeq worker gets worked up over the Kfir son deal. Of course there are camps in the company and the committee that are bitter and angry, but Kfir knows how to deal with them, because he has been chairman of the committee for more than a decade.

Kfir, together with the committee's PR adviser, Moti Morel, are putting Dick through basic training in managing a company with a tough union. The committee opened with a scathing personal attack, made Dick's life miserable and even followed him home - sticking up hundreds of posters in his own street slamming the damage he was doing to Bezeq (it rhymes in Hebrew), and his family felt threatened.

Kfir and Morel's tactics are clear: to frighten and exhaust the CEO, and to broadcast to them, the board, the Communications Ministry and even to the company's potential buyers, not to mess around with the workers' committee.

Normally, these tactics work. The last ports strike was another reminder of the state's weakness in face of the richest committees in the country's strongest companies. The better off the workers are, the more awash the company is in cash and the better the work conditions are - and paradoxically the less the state can do about it.

Shlomo Kfir categorically proved in the past month what previous Bezeq CEOs knew but never said: they didn't really manage the company. On every decision concerning personnel, organizational structure, hiring or firing, the workers' committee has veto power, and management can only advise.

But, this proof at this time, while the government attempts again to privatize Bezeq, could end up being a blessing.

It could be a reminder to the treasury, the Communications Ministry, the government, the public why Bezeq ought to be privatized, why the price of privatization should be of secondary importance.

The price at which the government sells off assets to commercial concerns traditionally end up screaming out of the financial press, especially when the price seems to be a bargain.

But what we tend to forget in cases like that of Bezeq, is the cost that the state and the taxpayer pay out every year that the company stays in state ownership.

In the past seven years, Bezeq workers have managed to squeeze out of the state, as a price for agreeing to privatization, some NIS 5 billion in extra pension benefits. This does not include the extra unnecessary workers in the overstaffed Bezeq machine.

The state, the CEOs that it appoints and the directors of Bezeq have proved powerless in standing up to the workers.

Amnon Dick is fighting now for his personal career. He needs to prove that he can stand a battle with the workers.

The moment Dick took up his post, there were claims that he was not suitable to run such a powerful company, which requires a certain type of manager. When Dick appointed Avi Pattir as his deputy, many saw this as a sign that Dick was trying to distance himself from the important issues - fighting with the committee over changes.

If Dick gives in now - and it doesn't matter if he stays in the company or finds another cushy number - he will anyway be seen as not suitable for managing the company after privatization.

If Dick does prove successful in seeing through the changes he has started, he will have served not only the company, but also himself. Because every private investor who needs to think of the next Bezeq CEO, will recognize that the greatest challenge he will face will be to pass the management of the company from the workers to the owners.