The Bottom Line / Double Dipping

Bank Leumi chairman Eitan Raff also serves as an advisor to the Meir family, Haaretz revealed yesterday. Raff is not the only chairman of the only board who moonlights.

Bank Leumi chairman Eitan Raff also serves as an advisor to the Meir family, Haaretz revealed yesterday. Raff is not the only chairman of the only board who moonlights. United Mizrahi Bank chairman Jacob Perry also serves as chairman of Lipman Engineering; First International Bank chairman Joshua Rosenzweig is also an active partner in a major law firm; and Union Bank chairman Zeev Abeles also serves on a few boards of directors in the business sector.

What allows all these figures to have simultaneous alternative careers is the definition of their bank jobs as part-time. Raff's job is a 90-percent affair; Perry serves Mizrahi in a 60-percent capacity, Abeles's job is for 75 percent of his time; and Rosenzweig is only required to show up for a 50-percent job. All are well remunerated for their bank jobs and don't need another occupation to make ends meet.

The reason most of the chairmen hold other jobs is that their bank jobs leave them free time. They don't have duties and are called on, for the most part, to run the board and its various committees.

It is impossible not to wonder if their extra jobs don't expose them to conflicts of interest. A bank chairman commands a huge database. He has access to information on business clients; the situation of industrial sectors is crystal clear to him; and his perspective of the country gives him the widest possible field of view.

It is only natural that a business would want to harness the services of a bank chairman with all that sensitive, high-quality information. The question is if the bank also reaps rewards. After all, such a conflict of interest could lead the bank to make decisions impacted by the chairman's other employment.

The concern is not abstract. Two years ago, the Gad Zeevi affair exploded, exposing the inherent problematic nature of serving double duty. During police interrogation regarding Zeevi's purchase of national phone company Bezeq shares, then First International Bank chairman Yigal Arnon was also serving as Zeevi's lawyer. Arnon had been involved in presenting documents testifying to Zeevi's financial stability for the purposes of a financing application to First International.

The lesson learned was to prohibit bank chairmen from discussing bank customers with bank employees, only with the CEOs. But the instruction didn't completely seal the loophole, it seems.

Bank of Israel regulations determine that someone whose occupation or occupations create conflict of interest with the bank cannot serve as a director of the bank. Surprisingly, the regulations don't differentiate between regular directors and chairmen, and apply the same conflict of interest limitations to both.

The approach appears distorted as there is a difference between a director who is not employed by the bank and whose entire job comes down to a few dozen meetings a year, and someone whose job at the bank is his primary occupation and who has intensive day-to-day contact with bank management.

It is hard to accuse Bank of Israel Supervisor of Banks Yoav Lehman of not looking lively, as he has recently flooded the sector with new regulations. But it seems like the question of bank chairmen's double duty could be reexamined for risk versus utility.