Amendment 16 of the Companies Law (5759-1999) continues to make it harder for controlling shareholders in public companies to approve their executive salaries at these companies. Alrov (Israel) Ltd. (TASE: ALRO) controlling shareholder Alfred Akirov has been forced to forego his salary as chairman of subsidiary Alrov Properties and Lodgings Ltd. (TASE: ALRPR). Amendment 16 stipulates that a majority of minority shareholders must approve the employment terms of the controlling shareholders in public companies (instead of only a third of such shareholders, as was previously the case). It also limits the employment contracts to three years.
Yesterday, Alrov Properties announced that Akirov asked to remove from the agenda an item relating to the agreement on management services he provides through his management company. Alrov Properties' board of directors will again review the agreement in late July 2012, when Akirov's management agreement at Alrov Israel expires. Akirov is also chairman of Alrov Israel. Until then, Akirov is asking for approval of his expenses related to the carrying out of his duties at Alrov Properties.
Akirov's management agreement with Alrov Properties was signed in mid-1995, and, since 2000, had been automatically extended by one year at a time. The cost of the agreement is estimated at NIS 2.7 million in 2011 (NIS 225,000 a month).
In 2010, Akirov's salary cost at Alrov Properties was NIS 2.5 million. Together with his NIS 3.8 million salary at Alrov Israel, his total salary cost was NIS 6.3 million. His salary cost at the two companies in 2008-10 was NIS 17.5 million.
Alrov Properties general shareholders meeting will also discuss the tripling of the salary of Alfred's wife, Hava Akirov, to NIS 60,000 a month, linked to the Consumer Price Index (CPI). She began working at Alrov during the 1980s, and has served as the company's hotels positioning and standards manager since 2002. Her salary cost in 2011 is estimated at NIS 237,000, reflecting a monthly salary of NIS 20,000.
The board of directors said that the contractual terms "are partly based on an examination by an outside expert of the accepted salary levels compared with the proposed compensation."
Alrov Israel's share price rose 0.1% today to NIS 78.71, giving a market cap of NIS 1.07 billion, and Alrov Properties' share price rose 1.6% to NIS 61, giving a market cap of NIS 1.38 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on December 22, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011