The Bank of Israel will not object to the removal of Shlomo Zohar as chairman of Israel Discount Bank (TASE: DSCT). It will however demand that his removal should be carried out according to the rules of proper corporate governance and banking procedures. The Bank of Israel believes that the controlling shareholder in a bank has the right to appoint a chairman of the board as he sees fit, as long as the appointment follows due procedure. Supervisor of Banks Rony Hizkiyahu refused to answer questions on the matter.
Sources inform "Globes" that a telephone conversation took place yesterday between senior figures in the Bronfman-Schron consortium and Bank of Israel regulators. The consortium representatives explained their position to the regulators, namely that everything done in connection with the request to Zohar that he should step down had been done in accordance with all applicable law and in accordance with proper corporate governance. They also stressed that the consortium was committed to fulfilling all Bank of Israel requirements, including those to do with expanding Discount Bank's capital and acting in accordance with proper corporate governance. They said that a planned rights issue would take place as soon as a new chairman was appointed at the bank.
Removal of an incumbent chairman must be done by the board and confirmed by a shareholders meeting, and not effected by the controlling shareholder orally informing the chairman that his services are no longer required.
The controlling shareholder in Discount Bank is the Bronfman-Schron consortium, which holds 26% of the shares. The senior representative of the consortium at the bank is Matthew Bronfman, but recently, his father, Edgar Bronfman, has started to interfere in his decisions and take over the reins of management. A few months ago, Edgar Bronfman appointed his confidant Joseph Ciechanover as his representative on the board.
As reported by "Globes" yesterday, Zohar has no intention of resigning. In view of this, the Bronfman family will have to forcibly end his term of office via the requisite procedures.
Published by Globes [online], Israel business news - www.globes-online.com - on November 2, 2009
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