Supervisor of Banks Rony Hizkiyahu has begun an investigation into apparently irregular bonuses paid by Union Bank of Israel (TASE: UNON), "Globes" has learned. The Bank of Israel will require explanations from Union Bank about the bonus that chairman Zeev Abeles is seeking, and bonuses approved for CEO Haim Freilichman and other senior managers.
The bonuses were approved despite the fact that the bank did not meet the return on equity threshold condition in the managers' employment agreements. The bonuses to the CEO and the chairman are at the rate of 1% of annual net profit each.
Union Bank said in response, "Decisions at the bank are made by those authorized to do so in accordance with the law, and this was the case with the bonuses. The bank is in constant touch with the representatives of the Banking Supervision Department in the normal course of business on al matters."
The Banking Supervision Department will demand to see the protocols of the discussion by the board of directors. The regulators intend t examine what where the board's stated grounds for approving the irregular bonuses, how each director voted, and how the board discussion was conducted for example, what questions were asked by directors, and whether the board dealt with the question of the failure to meet the return on equity threshold that was set.
If the Bank of Israel comes to the conclusion that the bonuses were not properly approved, it will require the board to hold a further discussion of the matter. It should be noted that Abeles is a former Supervisor of Banks.
The Banking Supervision Department is also considering handing the matter to the Securities Authority. In the past, the Securities Authority has dealt with irregular bonuses paid at Bezeq and Bank Hapoalim, and as a result senior managers at Bezeq were removed from their posts, while senior managers at Bank Hapoalim were made to repay money they received.
Last week, the Union Bank board, headed by Abeles, approved a NIS 2.6 million payment, on account of the bank's performance in 2009, to be divided between the CEO and five senior managers. In addition, the board unanimously approved a payment of NIS 1.2 million to Abeles himself. This is in addition to Abeles's NIS 2.5 million annual salary for a 75% position. The payment will be put before the general shareholders meeting summoned for August 16 for approval.
Union Bank made a profit of NIS 117 million in 2209, giving a return on equity of 6.8%, the lowest among the independent banks.
Published by Globes [online], Israel business news - www.globes-online.com - on July 11, 2010
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