The Bottom Line / Excessive Nevertheless

Victor Medina can bear criticism, but not an assault to his name or the trampling of his personal integrity. Therefore, Yossi Sarid's comparing him to Ernst Japhet was most harmful. Japhet was the king of the bank manipulators. He drove Bank Leumi into bankruptcy. The Bejski Commission investigated Japhet and found him guilty on several counts. He was convicted in criminal court for aggravated fraud, securities fraud, defrauding clients, and falsifying entries in corporate documents. So how can one discuss both men in the same breath? Is there no limit to populism and cruelty?

Medina took over United Mizrahi Bank in poor condition, with a return on capital of 1.3 percent, and turned it over with a return of 12.6 percent. He increased the bank's value to NIS 2 billion during his nine-year tenure, not including the NIS 450 million Mizrahi distributed in dividends. Mizrahi has had the sector's best results as well as the most conservative credit portfolio.

In contrast to Japhet, Medina did not set up a severance bonus for himself. The bank's private owners decided to do so on their own volition. Half of every shekel paid to him came from their pockets, with the other half from the remaining public shareholders.

The workers committee did not criticize the move. They appreciate his work: When he began his position, Mizrahi employees were the lowest wage earners among the five major banks while today they are the highest.

The decision to pay Medina a large NIS 13.5 million bonus, in addition to NIS 3 million of severance pay as stipulated in his contract, was based on the managing method of Sammy Ofer. According to his philosophy, managers should be compensated generously so they will spare no effort, so they will excel. Ofer makes successful managers wealthy and fires those who fail. It's that simple. That's how Ted Arison worked, and that's how Yitzhak Tshuva works, which is why they grab the best managers around.

In contrast, some businessmen maintain a contrary approach, dictating that they should pay managers as little as possible, and arguing over every shekel in order to keep for themselves as much as possible. This stingy method creates an awful atmosphere that drives away positive elements, and at the end of the day, both they and their managers profit less.

However, despite Medina's exceptional achievements, his severance pay is too high. Those who control major bodies like Mizrahi Bank need to take into account the social factor. They need to understand that excessive wage gaps cause social unrest and alienation. A society in which only a few merit great wealth in the face of poverty and widespread economic distress cannot hold together. It can express itself in strikes, demonstrations, crime, violence as well as the torching of banks. Therefore, when weighing salaries, owners need to care for a healthy society with tolerable gaps, a precondition for long-term bank stability.