In view of public criticism, Bank Leumi (TASE: LUMI) has raised the target for awarding bonuses to employees and executives. It announced today that bonuses will only be distributed if the bank's return on equity reaches 7.5%, up from the target of 6% in the original compensation plan.
Bank Leumi reportedly raised the bonus threshold because of dissatisfaction among investment institutions and Entropy Consultants Ltd. over the low target the bank set for awarding bonuses. It should be remembered that Amendment 20 to the Companies Law states that shareholders must approve a public companies executive compensation policy.
A 6% return on equity target is considered very low. Bank Leumi's return on equity for the first quarter of 2013 was 9.4%. Either the bank expects a severe worsening of its results, or it simply wants to guarantee the award of bonuses, after it distributed no bonuses to employees and executives in 2012, following heavy accounting write-offs.
Bank Hapoalim (TASE: POLI), run by CEO Zion Kenan, also published a clarification about its executive compensation policy, setting out the conditions for awarding bonuses and the proportion of the bonus's components for calculating its amount.
The figures released are not new, and they are based on the compensation plan of 2010, but in view of a request by Entropy Consultants Ltd., and to improve transparency, Bank Hapoalim reissued them. The bank's board of directors met a few days ago to approve them.
Bank Hapoalim states that a bonus will be awarded if the return on equity is half a percentage point higher than the cost of capital required, which is a variable that will be determined by two external advisers. As of 2013, the required price of capital is 8.75%, which means that a bonus will be distributed if the return on equity exceeds 9.25%. The bank added that even if the external advisers set a lower cost of capital required, no bonus will be awarded if the return on equity is lower than 8.5%.
Mizrahi Tefahot Bank (TASE:MZTF), run by CEO Eldad Fresher, has also published additional details about its executive compensation plan. The new document discloses details about the variable compensation cap (bonus and capital compensation in the form of shares and options), stating that the cap for chairman Moshe Weidman will be NIS 2.16 million, the cap for Fresher will be NIS 5.5 million, and the cap for other executives will be NIS 2.5 million.
Published by Globes [online], Israel business news - www.globes-online.com - on August 22, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013