Brainsway shares tumbled 13% on Monday after the announcement that its CEO Guy Ezekiel was stepping down after less than a year in the role. The first quarter results reported on Monday showed the company doubled its revenue for the quarter (to $2.5 million) and reduced its losses. The company's share price dropped by more than 50% during Ezekiel’s time in charge.
Brainsway's market cap on the Tel Aviv Stock Exchange is at a five-year low of NIS 227 million.
Ezekiel’s departure was likely spurred by a number of reasons. While he was able to increase its sales, he was unable to lead to the breakthrough the company was expecting. Meanwhile, differences emerged between him and the board of directors, specifically over the volume of expenses appropriate to the company and the amount of investment needed in the sales department.
There was also disagreement over the composition of the board, which currently consists mostly of Israelis - including the company’s founders. Ezekiel garnered much attention when he began in his role because of the generous compensation package he received.
He was to receive an annual salary of up to NIS 7 million in four years (salary, bonus, and options). He was also due a one-time payment of NIS 500,000 if Brainsway was sold or had a successful IPO abroad. In the end he was paid NIS 90,000 per month and received options that were in the money when he was appointed - but are not even close today.
Ezekiel was expected to receive bonuses for attaining sales goals or the sale or IPO of the company, but did not reach any of the milestones for the significant bonuses, nor is he eligible now to receive a retirement package.
A major part of the drop in share price during Ezekiel’s term was caused by the sale of shares by former CEO Uzi Sofer; Sofer was one of Brainsway’s founders and began offloading his shares mere days after Ezekiel’s appointment. Eventually, the rest of the founding group - Dr. David Zacut and Avner Hagai - bought out the rest of his holdings for NIS 3 million.
American CEO Syndrome
Ezekiel came to Brainsway through shareholder Yelin Lapidot (6.2%) as a professional CEO, with an American outlook, to replace founding CEO Uzi Sofer. He had previously founded, managed, and sold for more than $300 million the medical device company Ventor. He had also managed sales to the US market for an international conglomerate. Supposedly, Ezekiel’s Israeli character and his American experience were an ideal combination to avert "American CEO Syndrome", characterized by disagreements between the "parachuted" CEO and the Israeli company when the CEO has an excellent understanding of the market but not of the enterprise culture of Israeli firms.
It appears that although Ezekiel was only "American" in his professional experience, a culture war still broke out.
Published by Globes [online], Israel business news - www.globes-online.com - on May 31, 2016
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