The resignation of Benny Gaon unquestionably marks the end of a chapter in the State of Israel's business history. The concern's ups and downs perfectly illustrate this country's latent business and financial opportunities.
The Benny Gaon-Koor story will be required reading in schools of economics, business and politics. A mere ten years ago, in May 1987, Gaon was appointed general manager of a Histadrut concern breathing its dying gasps. In the 1987-89 period, Koor posted annual losses of NIS 453 million, NIS 372 million and NIS 595 million. Who can forget the mockery and contempt that accompanied Gaon on his way to the United States to negotiate with foreign banks ("on the steps of Bankers Trust"). Sceptics roamed the corridors of the Tel-Aviv District Court impatiently awaiting a liquidation hearing against Koor, while day by day, the concern's employees staged massive strikes.
At the end of 1991, after four nerve-wracking years, the Koor arrangement was signed. Some thought Gaon had managed to provide Koor with an oxygen tank, on the way to rehabilitation. Then, when he was about to undertake the turnaround, the prevailing assessment was that he ought to hand the reins to someone else.
A great deal can be said about Benny Gaon, and some criticism would certainly be in order. It is true that the road to the concern's rehabilitation was made considerably smoother by the capital market boom in the critical 1992-95 period. Also, the banks deigned to write off a substantial amount of debt, while rescheduling a lot more. Gaon's style, utterances and arrogance are all fair game, and other faults can no doubt be found if looked for. But his grand success, as expressed in the bottom line, absolutely cannot be taken away from him.
Koor, today, is the Israeli economy's healthiest and most profitable concern. In 1996, it achieved a net profit of NIS 625 million, and in the first nine months of 1997, net profit amounted to NIS 456 million.
Gaon, even his former critics now admit, turned out surprisingly well. Heading Koor for ten years, he advanced the concern to a lead position, its investments wise and well balanced. He also took vigorous action to free Koor of its historic ties to the Histadrut. It is no secret that Gaon was the moving force behind the sale of control in Koor to the US Shamrock group; and less than two years later, it was he who initiated the sale of Shamrock's holdings to Charles Bronfman.
Having set himself the goal of transforming Koor into a multi-national, Gaon forged ahead energetically. Under his auspices, many of the concern's companies were issued on stock exchanges in Israel and the United States, losing business entities were sold off or closed down, as was any business deemed non-synergetic with the concern. Gaon outlined a strategic plan whereby Koor would operate along three principal axes: telecommunications, high-tech, and agro-chemicals, plus the cement activities of Nesher and Mishab.
Rumours of Gaon's impending resignation started to circulate as early as two years back. Gaon, it was whispered, harboured political ambitions, having been named in the past as a candidate for the Finance Ministry, under the late Yitzhak Rabin. He was more than once quoted, at the time, as not excluding possible resignation; but all this was premature.
The first mention of a concrete possibility of his resigning came when, about a year ago, Gaon came into sharp conflict with Shamrock President Stanley Gold. Their 'marriage' was obviously not destined to last. Sure enough, a divorce took place, but Gaon again exhibited an extraordinary talent for survival. As Gold bowed out, shorn of Koor but padded with a pile of cash, Gaon was already starring as best man at the next wedding.
The debut of the Bronfman-controlled Claridge group into the control of Koor, was welcomed by the capital markets and the business community. For the first time, the concern was getting a true strategic partner rather than a financial partner, as Shamrock proved to be. It was obvious, though, that the group's live wire, Claridge President Jonathan Kolber, was not going to play a passive role. No sooner was the take-over completed than Kolber was appointed active chairman. Neither Kolber nor Gaon are the sort to play second fiddle.
Kolber and Bronfman didn't exactly ask Gaon to go. On the other hand, his departure isn't exactly voluntary, either. Things are crowded at the top of Koor's pyramid, and Gaon decided prevention was better than cure. His close associates note that he preferred to resign of his own free will, at a time of his own choosing, rather than take a painful kick to end so successful a term of office.
In two days time (Thursday), Koor's Board of Directors will hold a meeting, in honour of which Chairman Bronfman himself will come to Israel. When it is over, Bronfman is expected to announce 'Gaon's decision' to resign. Kolber is expected to be appointed general manager, and his right hand man, Danny Biran, chief business manager. Gaon's resignation is expected to take effect this June, and the generous options already awarded him by the Shamrock and Bronfman groups will go with him.
Gaon's inner circle deny that his resignation has to do with serious differences of opinion with Kolber. They confirm, however, that the strategic plan outlined by Kolber and his team, is not completely to Gaon's liking. While in favour of promoting telecommunications and agro-chemicals, he opposed selling control in Mishab. Perceiving that his opinion no longer carried preponderant weight, as in the past, he realised it was time to leave.
Gaon ran Koor pretty much as if he owned it. This is his first encounter with the real owners, who sometimes accept his views and sometimes do not. Moreover, Gaon is not accustomed to having to ask permission every step of the way. He has had to do so, in recent months, and hasn't liked it at all, to put it mildly. Gaon realised that Koor's top slot held nothing more for him, and it was time to go.
This morning (Tuesday), a pall of depression overhung Koor's head offices. The future of many people who have marched a long road with Gaon, is now no longer clear. The Koor staff numbers sixty. It is estimated that the Claridge group's streamlining plan will result in its being downsized to twenty. More managers are expected to follow in Gaon's outgoing footsteps. Not a few are already wondering whether or not to bow out gracefully before being asked, and hope this can be done in a spirit of goodwill, and, obviously, on good terms.
Gaon was reticent today, about his plans for the future. All he would tell his associates was "I won't stay home to grow flowers". Recent months have brought with them one telling lesson, that Gaon has taken to heart: a salaried employee, no matter how brilliant, is just an employee. He who pays the piper calls the tune.
Published by Israel's Business Arena March 10, 1998