Fischer candidacy plagued by flawed selection

Stanley Fischer  / Photo: Reuters

It is embarrassing that Stanley Fischer should be subject to the controversy of his selection to be a candidate for Bank Hapoalim's board

After a stormy 2019, it seemed like plain sailing for Bank Hapoalim (TASE: POLI) in 2020. Dov Kotler won an intensive race to replace Arik Pinto as CEO and the US tax evasion case was finally settled.

But then in June chairman Oded Eran unexpectedly fell ill and died and was replaced by Reuven Krupnick, a respected member of the board of directors. Things seemed to have calmed down until yesterday when former Bank of Israel Governor and former US Fed Vice Chairman was named as a candidate for the board of directors.

Fischer is a world class economist and there are few people like him, if any, in Israel. He has vast experience as a macroeconomist on the world stage. Although he is not assured of being selected to sit on the board, his chances must be very good and among other things it would sit well with Hapoalim's foreign investors (of which there are many) and its institutional investors. His age, 76, is his only possible disadvantage.

It is also clear that Fischer would be no ordinary director and perhaps he could be seen as a future chairman, although Krupnick was only recently appointed and has the full confidence of the board and the Bank of Israel.

There would be a certain irony about Fischer joining Hapoalim's board. He has an interesting connection to current norms of 'proper corporate governance' in the world of banking. As Governor of the Bank of Israel he gave his full backing to then Supervisor of Banks Rony Hizkiyahu to oust Bank Hapoalim chairman Dan Dankner. Controlling shareholder Shari Arison tried to stand up against Fischer but failed.

The current struggle is not so much the appointment of Stanley Fischer and the threat to the dominance of Reuven Krupnick as chairman. The struggle is also over the composition of the board of directors in the broadest sense. The committee for choosing directors under the Bank of Israel did not approve the continuation of Dalia Lev on the board, which essentially means she was ousted. This is dramatic enough in itself. Lev was involved in approving Dov Kotler as CEO, ending the tradition whereby the CEO is promoted from within, as well as closing the US tax evasion case. She was considered close to Krupnick. Does this mean that Hapoalim is on the way to a de facto struggle over the chairmanship?

Either way the behavior of the Emeritus Judge Moshe Gal who heads the committee for choosing bank directors seems like an example of not doing as you demand from others by those responsible for corporate governance and regulation, who set the rules for others, but break the rules when it's convenient for them. Even if there is no disputing the leading and unique status of Fischer, there was here perhaps a trampling on the rules of proper governance in order to push his candidacy through - even if it was 'constitutional.'

The committee yesterday put out a routine announcement in which the candidates were listed and then it was mentioned that David Avner, a member of the committee who represents Bank Hapoalim had resigned. Only afterwards following a storm of criticism did the committee see fit to be transparent and reveal why there had been a disagreement between Avner and the other members of the committee because a vote had been taken before a replacement for Krupnick had been named. Krupnick had been the other Hapoalim representative on the committee but had stepped down when he became chairman of the bank.

David Avner might be right that the committee's behavior was flawed but on the other hand is it appropriate that a candidate of Stanley Fischer's caliber should be subject to the embarrassing controversy that the issue is receiving?

Published by Globes, Israel business news - en.globes.co.il - on August 27, 2020 © Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Stanley Fischer  / Photo: Reuters
Stanley Fischer / Photo: Reuters
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