With new CEO, Discount Bank signals unified policy

Eran Peer

The federation of Discount will turn into a single country.

Yesterday afternoon's laconic announcement by Israel Discount Bank (TASE: DSCT) of the appointment of Reuven Spiegel as CEO papered over a lot of matters of far-reaching consequences for the bank. Note the choice of words by chairman Yossi Bachar. "We elected the best candidate to manage the group," he said. He did not say "the bank"; he said "the group".

This is a significant change, revolutionary even, at Discount Bank. Until now, Discount Bank was run like a federation of independent tribes in a loose alliance. At the head was the CEO of Discount Bank, but his election was a formality, not a practical matter; some of the tribes, such as Mercantile Discount Bank, ran independent foreign policies. Others, like Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa), wandered into dangerous territory, while Spiegel, as president and CEO of Israel Discount Bank of New York, did as he pleased. Not to mention his predecessor, Arie Sheer, who was so independent that no one in Israel had a clue what was going on in New York.

The mess at ICC-Cal and its corporate governance flaws led to the necessary conclusion: Discount Bank can no longer allow itself to operate with every unit doing as it pleases. It doesn’t work, it's inefficient, and it's too dangerous. Proper corporate governance demands operating as a group with all that that implies. Bachar understands this, and he is setting the group's direction.

By the way, this is exactly what is stated in the draft Proper Banking Procedures (301) on the functioning of the Board of Directors, issued last week by Supervisor of Banks Rony Hizkiyahu.

Now the federation of Discount will turn into a single country. If until now, each unit was headed by a sovereign CEO, who made decisions and managed the systems alone; this will cease. Spiegel will begin to ask questions, issue directives, and take authority to manage the system as a whole, from the setting of targets to the day-to-day reporting, supervision, and oversight.

There is another matter: the amusing game known as the search committee has become meaningless. A year ago, the Bank Hapoalim (TASE: POLI) search committee picked (surprise, surprise) Zion Kenan as CEO, the leading insider candidate for the job who had been picked out at the outset. The Discount Bank search committee picked Spiegel, the candidate marked at the start to replace Giora Offer. So why all the fuss? To elect the candidate known from the beginning? To please the Bank of Israel?

Published by Globes [online], Israel business news - www.globes-online.com - on August 26, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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