Since early May, Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) has been at the eye of an extraordinary storm raised by a power struggle between the chairman of the company's board of directors, Dan Naveh, and its CEO, Yoram Naveh (no relation). The battle at the top of the insurance group, which has no controlling shareholder, began with an attempt by the chairman to remove the CEO, and the latter's resistance, which included a letter full of severe accusations and the chairman and shareholders in the company.
Last week, the cooling off period imposed on Clal Insurance by the head of the Capital Markets, Insurance and Savings Authority ended, with the publication of the report of the external examiner appointed at his instigation by the company's audit committee.
There will now erupt a battle between the chairman and the CEO to secure a majority among the directors, which will discuss whether to dismiss the CEO as the chairman wishes, on the grounds of weak performance by the company, or whether perhaps to signal to the chairman that the board has lost confidence in him and point him towards the exit. At the end of the battle we will know which of the two (or perhaps both of them) will be forced leave the company. At present, both say they have no intention of resigning.
The report by the external examiners, former Supreme Court judge Yoram Danziger, and Dr. Eyal Geva of the law firm of Matry, Meiri & Co., was delivered to the directors of Clal Insurance last week. It contains findings unflattering to both sides.
Ultimately, the report rejects the accusations of illegitimate motives levelled at the chairman by the CEO, on the grounds of lack of evidence, but it does find fault with the chairman's conduct in that he initiated talks with the CEO in which he requested that the CEO should resign voluntarily, without the matter having been discussed by the board.
The CEO, Yoram Naveh, told "Globes" on the release of the report, "I gave my response to the board, and this is certainly not an easy period for me, with the chairman of the board casting doubt on me and on my continuation in my position, and this at a time when I am giving my all for the success of the company."
For his part, chairman Dan Naveh welcomed the report, and stated that "the report refutes the claims raised against me as my conduct vis-a-vis the company's shareholders is concerned, and it confirms the fact that I acted with independent judgment, in good faith, for the good of the company and to make it successful."
What now? The report states that from the examiners' conversations with directors of the company and of its publicly traded parent company (Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS)), a majority of them does not see eye to eye with the chairman, and sees the CEO as having complied with the plans approved by the board and as having advanced Clal Insurance in many areas, so that there are no grounds for dismissing him. The main criticism of him is over insufficient efficiency measures in the company under his management. But alongside the examiner's finding that the chairman circumvented the board (which the directors presumably noted) there is considerable criticism at the company of the letter that the CEO sent to the board and its harsh language.
In his letter, Naveh compared the company to a grocery store, claiming that pressure was brought to bear concerning management of the investment of policyholders' money, claims that were not validated by the examiners' report. The board will have to decide what to do with a CEO who comes out against the chairman of the company he manages, which manages the public's money to the tune of some NIS 200 billion, when his claims have not been accepted by the examiner.
Capital Markets, Insurance and Savings Authority chief Moshe Bareket, who appears to side with Yoram Naveh (who worked alongside him thirteen years ago at the Israel Securities Authority) will need to come to conclusions about the conduct of two of the main shareholders in Clal Insurance, who hold permits for their holdings in the company, Mori Arkin and Alfred Akirov's Alrov, and about the board and its chairman, and find a solution in which undoubtedly someone's head will roll.
One of the most important matters in the examiners' report, and something that relates to the insurance industry as a whole, is what Danziger calls "the Alrov case", "which appears to indicate an attempt by Alrov to influence representatives of Clal Insurance in connection with holdings by Clal in Alrov shares." On this, the report recommends strengthening procedures for management of policyholders' investments and safeguarding them from pressures "liable to be brought to bear on them by third parties", something that applies to all boards of directors and all CEOs in all financial institutions.
Published by Globes, Israel business news - en.globes.co.il - on June 14, 2020
© Copyright of Globes Publisher Itonut (1983) Ltd. 2020