The board of directors of Bank Leumi (TASE: LUMI) is led by the management; decisions reach the board from the management fully formulated and drafted, the board accepts them, and the discussion of them is short and fails to go into depth; in a substantial number of cases, board decisions at Bank Leumi are passed in the same form as they arrive from management; the Bank Leumi board does not initiate active supervision of management and hardly ever raises matters for discussion by itself. This is the picture that emerges from an audit report of Supervisor of Banks Rony Hizkiyahu on the activity of the Bank Leumi board.
The report also raises the question of what weight the board carries in setting the direction for Bank Leumi's management.
The final report, drafts of which have gone back and forth between the Bank of Israel and Bank Leumi, will be laid on the desk of incoming chairman David Brodet, as soon as the Bank Supervision Department approves his appointment and he takes up his post.
The report surveys decisions made or reviewed by the board, and examines whether the board's activity is in accordance with the principles of good corporate governance.
Another chapter of the report deals with the broad scope of the representational activity of Adv. Dalia Tal, to the extent of suspicion of a conflict of interests. Adv. Tal represents and advises the bank's management at the same time as advising and representing the board. The report finds that there cannot be full correlation between the two roles, since the management is the executive body, and the board is meant to supervise the management. A legal counsel cannot advise the board on how to supervise the management and at the same time advise the management and be a party to its decisions and actions.
Adv. Tal has provided services to Bank Leumi for 20 years. She is considered a close personal friend of Bank Leumi CEO Galia Maor.
Bank Leumi stated in response: "As reported in "Globes" several months ago, the Bank of Israel has been auditing the way the boards of directors of the various banks function, with a view to revising the Bank of Israel's circular on the matter. Regardless of the report, it should be pointed out that Bank Leumi is known in the banking system in general, and among the various regulatory bodies, as a bank run in exemplary fashion as far as corporate governance is concerned, despite the fact that it is a bank without a defined controlling interest. Leumi has always acted and always acts in accordance with regulatory guidelines, and will do so in the future."
Published by Globes [online], Israel business news - www.globes-online.com - on July 29, 2010
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