The board of Bank Hapoalim (LSE: BKHD; TASE: POLI) met again this morning, for the third time in a week. The board discussed the report issued by the Bank of Israel which is critical of the way current CEO Zion Keinan was appointed to his role.
The Israel Securities Authority ruled that the bank must make public the main points of the report, and Bank Hapoalim did so this morning.
Hapoalim controlling shareholder Shari Arison has added New York attorney James M. Dubin, a partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP, to the team dealing with the crisis at the bank.
Bank of Israel officials believe that the report will be a turning point in the battle to oust chairman Dan Dankner.
The Bank of Israel reports states, "The chairman of the board of directors ostensibly acted in a manner that did not allow for the CEO to continue in his post."
The report begins by noting that Dan Dankner and the board did not comply with the provisions of the Companies Law or the Proper Conduct of Banking Business Regulation No. 301. Commenting on the dispute between Dankner and ousted president and CEO Zvi Ziv, the report states, "The result was both substantive and procedural flaws in the proper conduct of banking business and in decision making."
Bank Hapoalim disagrees with the Bank of Israel's conclusions, but says, "The bank intends to conduct a thorough review of the Banking Supervisor's letter" by May 6.
The Bank of Israel intends to require Bank Hapoalim to carry out a valid procedure for finding and appointing a new CEO. The report states, "At the board meeting, the directors were not presented with relevant information and figures that would enable them to use their judgment and make a calculated independent decision about the proper procedure for selecting a new CEO for the bank."
Bank Hapoalim has published three opinions by Prof. Lucian Arye Bebchuk, Adv. Varda Lusthaus, and Dr. Yoram A. Turbowicz, which support the bank's position in its dispute with the Bank of Israel.
Bebchuk states, "The bank acted properly and in accordance with its general policy in the appointment of Zion Keinan." Bebchuk is an internationally respected expert in corporate law who teaches at Harvard University and Tel Aviv University.
Bebchuk adds, "It is not the job of the regulator to compel the appointment of a search committee, especially in the case before us." He cites a slew of examples from around the world in which large companies announced the resignation or ouster of a CEO and immediately appointed a replacement. The examples included Wal-Mart Stores Inc. (NYSE: WMT), The Coca-Cola Company (NYSE: KP), Alcoa Inc. (NYSE: AA), Citizens Republic Bancorp Inc. (Nasdaq: CRBC), ING Group NV (Euronext: INGS; NYSE: ING), and Toshiba Ltd. (TSE: 6502; LSE: TOS; XETRA, AEX, Paris: TSBA).
Bebchuk said that Keinan is the best man to be Bank Hapoalim's new CEO because, as deputy CEO, he "was on the directors' radar screen as a potential CEO for a long time… He was a 'natural' candidate."
Bebchuk took this argument one step further. He says, "The decision not to appoint a search committee was also due to the directors' knowledge about how few potential candidates were suited for the position of CEO from outside Bank Hapoalim… They assessed that there was no better candidate than Keinan who would be willing to take on the job."
Bebchuk argues that Bank Hapoalim's board "also tried to avoid a leadership vacuum", given the global crisis and the crisis at the bank.
Published by Globes [online], Israel business news - www.globes-online.com - on April 30, 2009
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