The Tel Aviv District Court today allowed Ilex Medical Ltd. (TASE:ILX) shareholders to file a derivative lawsuit on behalf of the company against former CEO and controlling shareholder Moshe Ben-Shaul and the board of directors for awarding him a profligate salary without approval of a general shareholders meeting.
The claimants contend that Ben-Shaul's salary and employment terms did not receive the proper approvals, including by a general shareholders meeting. The shareholders are demanding that he repay the company NIS 31 million in alleged improper salary payments received since 2005.
In her ruling, Tel Aviv District Court Economics Division Judge Ruth Ronnen said, "There are numerous indications which raise doubts that Ben-Shaul's salary was fair." She added that, compared with other salaried executives, including that of CEOs of companies with similar activity, "do not strengthen the conclusion that Ben-Shaul's salary was reasonable or fair."
Judge Ronnen added that Ben-Shaul's salary arrangement was also problematic because of how his salary was raised. "Ben-Shaul was eligible under the terms of his salary contract to a 7% raise in real terms, independent of any other variable. In this way, Ben-Shaul received a substantial salary hike in real terms over the years. For example, his salary was NIS 2.4 million in 2004, NIS 8 million in 2010, and NIS 10.6 million in 2011," she wrote.
Ronnen added, "This matter does not necessarily and unequivocally mean that Ben-Shaul's current salary is fair, but it raises serious questions which should be answered."
In July 2011, the Israel Securities Authority ruled that Ilex Medical paid Ben-Shaul NIS 31 million in material breach of his employment contract. Ilex's board of directors rejected the Securities Authority's ruling, saying that the payments to Ben-Shaul were legal. The Securities Authority did not order restitution of the money, but its position enabled Ilex's shareholders to sue Ben-Shaul to repay the money.
Published by Globes [online], Israel business news - www.globes-online.com - on December 16, 2012
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