In the wake of Bank Leumi (TASE: LUMI), Israel Discount Bank (TASE: DSCT), and Union Bank of Israel (TASE: UNON), Bank Hapoalim (TASE: POLI) today presented its new remuneration plan for the bank's executives. This plan conforms to the executives' salary law, which set a NIS 2.5 million salary ceiling. The remuneration plan will be presented for approval at the Bank Hapoalim shareholders' meeting next month.
As expected, Bank Hapoalim CEO Arik Pinto's annual salary will be NIS 2.5 million, the maximum allowed. While other bank CEOs receive their entire salary in cash, regardless of the bank's performance, a small part of this salary is in blocked shares. Under the plan, Pinto will receive shares worth NIS 100,000; the shares will be blocked for three years, after which they can be sold. The purpose of giving blocked shares is to award the CEO a type of option for receiving remuneration that can reach NIS 2.5 million in the long term, thereby giving him an incentive to lead the bank to achievements, under the assumption that these achievements will be reflected in the share price.
It should nevertheless be stressed that when the shares are received, their value will be NIS 100,000, regardless of the bank's results, with no deviation from the NIS 2.5 million limit. If Pinto retains the shares and their value rises, however, his actual remuneration will be greater.
The plan indicates that Pinto, who was appointed CEO three months ago, will have a NIS 195,000 monthly salary. Together with the accompanying terms and his blocked shares, the cost of his salary will be NIS 2.5 million. The salary terms took effect in mid-October; before then, his salary terms were according to his previous contract as a bank executive, a job in which his pay was probably higher than that of a CEO under the new executive salary's law.
The remuneration plan also refers to the terms for the bank's other managers. At Bank Hapoalim, the terms for executives are considered the best in the banking system, and these will also be cut sharply following the new law.
According to the executive remuneration plan, executive bonuses will amount to 4.75-6 monthly salaries, compared with up to 12 months' salary under the previous plan. The executive bonuses will be determined according to parameters of the weighted return on capital and the personal targets for each executive and his division. The CEO can also exercise his judgment in granting executive bonuses.
The new plan will also reduce executives' regular salaries, so that the cost of the salaries does not exceed NIS 2.5 million, even if the maximum bonus is awarded. Up until now, some executives were paid only a NIS 2 million basic salary.
The High Court of Justice recently ruled that the executives' salary law does not apply to past rights. At the same time, the Court's ruling was general, not universal. Bank Hapoalim accordingly added a clause to the remuneration plan stating that employees concerned that the law will affect their past rights can resign "on paper," cash in the compensation due them for their work up until now, and sign a new contract with new terms that complies with the executive salaries law.
Published by Globes [online], Israel business news - www.globes-online.com - on November 9, 2016
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