Following fierce public criticism of the salary grab by Israel Corporation (TASE: ILCO) executives, chairman Amir Elstein is foregoing the changes in his employment terms. Sources inform ''Globes'' that, a few days ago, he wrote to the board of directors of the company, controlled by Idan Ofer, asking that his three-year extension should have the current salary terms.
The concession is only partial. Elstein's current salary is one of the highest in the economy, and it is doubtful if Israel Corp.'s shareholders would have approved his salary under the new executives salary law, which will come into effect the day after the company's general shareholders meeting.
Two weeks ago, Israel Corp. announced that it was convening a general shareholders meeting for next Tuesday. At the meeting, shareholders will be asked to extend Elstein and CEO Nir Gilad's terms of office by three years, from July 2013, with substantially improved employment terms.
The timing of the general shareholders meeting to approve the salaries caused sharp criticism, as it comes just a day before the executives salary law (amendment 20 of the Companies Law (5759-1999) comes into effect. The amendment, which the Knesset passed in early July, includes a number of far-reaching reforms which will drastically curtail the employment terms of executives at public companies, beginning with the requirement that a majority of minority public shareholders approve their salaries.
Gilad and Elstein believed, probably correctly, that there was little chance that the minority shareholders would approve the salary terms. They therefore timed the general shareholders meeting for the last day when an ordinary majority of shareholders (including controlling shareholder Idan Ofer, who supports the new salary terms) was needed to approve the salary terms.
Under the new contracts, Israel Corp. estimated that Gilad and Elstein's salary costs would each total NIS 15.5 million in 2012, not including an annual bonus, if one is given. Most of the amount - NIS 10.5 million each - is in options. The general shareholders meeting was due to approve options worth almost NIS 100 million, half of which would be distributed in equal shares between Gilad and Elstein.
Other changes in the employment contracts
Gilad and Elstein's current salary costs are among the highest in Israel. In 2011, Gilad's salary cost was NIS 21.1 million, mostly in stock-based compensation. His salary cost over the past five years of his employment at the company was NIS 73.5 million. The salary cost of Elstein, who took up his post in July 2010, was NIS 15 million in 2011, half of which was in stock-based compensation.
In addition to the generous options packages, Israel Corp. has asked to make other changes in Gilad and Elstein's contracts, including an early maturity mechanism for the options, new adaptation terms if they terminate their positions, a retirement bonus at the board's discretion, and a proportionate bonus based on the company's performance in the year in which they ended their terms.
As of web-posting, it is not clear whether Gilad will also forego his new salary terms.
Published by Globes [online], Israel business news - www.globes-online.com - on December 9, 2012
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