Israel's business community shows its cold shoulders

Stanley Fischer  / Photo: Eyal Izhar, Globes

Stanley Fischer and Eli Rozenberg have little in common but find themselves treated in the same way by Bank Hapoalim and El Al.

Eli Rozenberg and Prof. Stanley Fischer have little in common. Rozenberg is a young man from a wealthy family with no known business experience but who is looking to build an impressive career and buy control of El Al. Fischer is a not so young man who is considered one of the world's preeminent economic experts, who has been Governor of the Bank of Israel, Deputy Chairman of the US Federal Reserve and Deputy Chairman of Citicorp and much more.

But both men find themselves in the same boat, being treating disrespectfully with cold shoulders and sharp elbows by senior Israeli business figures at two of the country's veteran publicly traded national business institutions - El Al Israel Airlines Ltd. (TASE: ELAL) and Bank Hapoalim (TASE: POLI).

The two men have different aims. Rozenberg, the son of New York-based businessman Kenny Rozenberg, wants to buy control of El Al while Fischer wants to be chairman of Bank Hapoalim. In both cases the boards of directors have closed ranks and done everything within their power, to keep the outsiders outside. In Britain it might be called the 'old school tie' although in business culture worldwide, there has always been a reluctance to allow in a new broom.

The situations of El Al and Bank Hapoalim are also very different. El Al was losing money even before the Covid-19 pandemic pushed it to the brink of insolvency. Bank Hapoalim is doing just fine.

Despite hiring a battalion of top members of Israel's business community - lawyers, accountants and former senior civil servants - receiving a permit to buy control of the financially troubled airline, bidding $101 million to buy 45% of El Al and depositing a large sum in a trustees account, El Al's board refused to meet with Rozenberg and cast aspersions on him and his family. Only after his lawyers sent aggressive letters and even threatened a defamation suit, was a formal, unproductive meeting set up.

Stanley Fischer was treated just as shabbily despite his glittering reputation. When it became clear earlier this year that the late Bank Hapoalim chairman Oded Eran was terminally ill, Fischer let it be known that he was interested in the job. Hapoalim's board of directors response was rapidly close ranks and to fast track board member and insider Reuven Krupik into the job and get Bank of Israel approval.

But Fischer, who knows Israel's banking system well, did not give up. While Hapoalim's board chooses its own chairman it cannot choose who sits on the board. That is done by an independent public committee which recommends candidates for the shareholders to vote on. Fischer put up his candidacy for one of two vacant slots being voted on at the upcoming shareholders meeting and was one of three candidates chosen last week.

Remarkably, David Avner, Bank Hapoalim's board member representative on the committee gave Fischer a 'low mark' and then resigned in protest when he was selected. Avner complained that the second Hapoalim board representative on the committee, who had been Krupik but who had had to step down now that he was chairman, had not been replaced.

No doubt El Al's board would argue that it is protecting the airline from a dubious bidder with no track record in business but it would be preposterous for Hapoalim's board to make the same argument about Fischer.

In both cases the boards are likely protecting their own interests. El Al's board and management seem to be working to ensure that the Borovitz family retains its control of the airline. Hapoalim's board likely feel threatened by Fischer's eminence and a man who forcibly removed a former chairman Dan Dankner, by pressing then controlling shareholder Shari Arison to oust him because of pending criminal charges.

Ultimately Rozenberg looks unlikely to prevail in buying control of El Al. Two other bidders - David Sapir and Meir Gurvitz - have offered to share ownership in Knafaim, the holding company through which the Borovitz's control El Al.

But Fischer will likely be voted onto the Hapoalim board by shareholders despite the low mark given to him by Avner. Krupik will need to seek re-election as Hapoalim chairman in early 2021 and by then he might have a well-placed rival in the shape of the former Bank of Israel Governor.

Published by Globes, Israel business news - en.globes.co.il - on September 2, 2020 © Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Stanley Fischer  / Photo: Eyal Izhar, Globes
Stanley Fischer / Photo: Eyal Izhar, Globes
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