We, the media, certainly went to town over Benny Gaon’s NIS 50 million worth of options in Koor. The thousands of words penned to describe the how and why and how much of Gaon’s benefits were more than a belly-full. We then made a gigantic hullabaloo over Shlomo Piotrkowsky’s 2% in Cellcom, estimated at NIS 200 million. A record to break all records. Low key celebrations were also held for Amiram Sivan and Jonathan Kolber. Every man and his options.
But the above compensation is clearly peanuts compared to the rewards flowing to Avi Naor and Boaz Dotan, the Israeli economy’s two wealthiest salaried employees. Boaz who? Avi who? Naor and Dotan are not familiar figures in the Israeli capital market. They have never bared their souls to the press, which is hardly surprising. Their common employers, the Aurec group, is seen as a quasi-clandestine, highly compartmentalised organisation. Definitely stingy about passing out information.
Some hairline cracks started appearing in this wall of secrecy when Amdocs made its Wall Street IPO. The company was floated in June 1998 at $14 per share. This week, it shot up to $21 per share, in view of the company’s excellent Q4 1998 reports.
The company’s prospectus provides a few pointers as to the value of the shares held by employees. The company notes that, back in 1997, it created an allowance of $25.8 million for a managers and employees fund, in consideration of their past performances. In September 1997, prior to the IPO, the fund acquired 5.72 million Amdocs shares for $31.6 million (at just $5.5 per share). This package is currently estimated, on the basis of Amdocs’s market price, at $120 million. That is to say, the company actually made a gift of one hundred and twenty million dollars to its employees. The fund is under an obligation to sell all its share and distribute them to employees in the form of cash.
The recipients, on the face of it, would be Amdocs’s staff of 2,900. Not so! At about the time of the issue, unrest was reported in Amdocs following the distribution of options and shares. The ill feeling is believed to have been generated by the fact that only a very small number of managers and directors were given options. Dotan and Naor, of course, were among them, and can accordingly be supposed to have taken a large slice of that $120 million cake.
It doesn’t end there. In January 1998, the company resolved to continue its largesse to senior employees. Amdocs allocated 1.651 million options at an exercise price of $1.92 per share for a period of four years. Six months later, in June 1998, the company allocated another 855,400 options at an exercise price identical to the previous package, for a period of three and a half years. The company noted that it had created an $103 million allowance due to the difference between the exercise price and the economic price of the shares at that time. This entire hand-out, translated into terms of gift value, amounts to a $47 million benefit.
A group of senior managers received yet another gift-wrapped benefit in the shape of an Amdocs shareholding, through Amdocs International and not through options. Amdocs International, which has a 23.4% stake in Amdocs, is controlled by Maurice Kahan. In its prospectus, the company notes that the minority shareholders in Amdocs International (18.71%) include several company management members, one of whom is a director.
Another interesting detail revealed by the prospectus is that the minority shareholders and Maurice Kahan are at loggerheads over the rights of the former. In any event, the said managers, including the said director, have a sequential holding of a package of Amdocs shares worth $180 million.
Just a second, there is more to come. The senior managers of Amdocs also possess a direct share-holding in the company. Not just a negligible amount, but 10% of the company’s shares which, translated into money, means $400 million. The prospectus, of course, with its niggardly disclosure of details, does not state which of the managers hold the share package, yet does volunteer the following nugget of information: only nineteen directors and managers hold this enormous share package - giving each an average holding of twenty million dollars in shares.
Totting up the value of all options and shares distributed to the senior managers of Amdocs, we arrive at the breathtaking figure of $750 million! Naor Dotan has evidently been the recipient of a substantial portion of these - and other - benefits.
A whole other series of senior managers occupying seats on the Amdocs Board of Directors have benefited from the cornucopia, evidently becoming multi-millionaires in recent years:
- Dov Bahrav (47), Amdocs senior vice president and finance manager, and is responsible for reconciling subsidiary companies' financial statements. Bahrav joined the company in 1991 in St. Louis, Missouri, serving, until 1995, as vice president and as president of Amdocs’ principal subsidiary in the United States.
- Nehemia Lemelbaum (55), Amdocs senior vice president and technological manager. He joined the company in 1985, in charge of its US operations. Lemelbaum managed the Yellow Pages graphic development project and supervised development of the company’s billing and customer services systems.
- Joshua Erlich (48), senior vice president for business development. Erlich co-ordinates new business development. He joined the company in 1985, serving as accountant of one of Amdocs’ most important North American facilities, and was later in charge of co-ordinating sales support activities.
- Shimon Kassif (55), Amdocs senior vice president in the UK, in charge of developing the company’s ties with strategic customers in Europe. Kassif joined Amdocs in 1994, dedicating all his business development energy to billing and customer service. Before joining Amdocs, Kassif was Bezeq’s vice president for systems and computers for twelve years.
- Paz Litman (41), who has been a director in Amdocs since May 1997. From October 1996, he served as president of Aurum Management and Consultation, a private company that executes and manages investments for the shareholders of the Aurec group.
- Shmuel Meitar (53), who has been an Amdocs director since 1989. Commencing 1991, he has held the office of Aurec deputy chairman. Before 1991, Meitar served as president of the Aurec group, including Golden Channels, Israel's largest cable TV concessionaire, and Yellow Pages.
- Ravital Naveh (30), who has been an Amdocs director since April 1998. In July 1997, Naveh joined Aurum Management and Consultation, a private company that executes and manages investments for the shareholders of the Aurec group.
Published by Israel's Business Arena January 28, 1999