1. Now it is official: the State of Israel no longer rules at Bank Leumi (TASE: LUMI). The state, which formally gave up its control at the bank as part of the Marani Law (officially Amendment 13 to the Banking (Licensing) Law (5741-1981)), yesterday lost its practical influence on the bank’s conduct, and became just another ordinary shareholder.

Despite the government’s official and public objections to raising the salary of Bank Leumi chairman David Brodet, and increasing the bank’s issued share capital, the board of directors chose to ignore the government’s position, and put the issues to the vote at the general shareholders meeting, where the board succeeded in getting them passed. The votes came despite objections by Accountant General Michal Abadi-Boiangiu.

2. When the Ministry of Finance wants to send a message, it knows how to do so. The ministry has enough means and power to press, influence, and make things happen the way it wants. This time, it seemed that the government did not really care whether Brodet’s salary would be raised by 3.7%.

The proposal to raise Brodet’s salary was made in late March. The invitation to the general meeting was published in late June. Although the Ministry of Finance made the government’s position clear to Bank Leumi, for some reason, only yesterday, after the media began to question Brodet’s problematic pay hike on the eve of a recession and cutbacks, did Abadi-Boiangiu sound a strong public objection. By then it was too late, the investment institutions had already decided how to vote, and they do not normally change their minds after approval by their investment committees.

It seems that the Ministry of Finance chose the convenient solution: on the one hand, it did not wrangle with Brodet, who is one of the ministry’s own, and it did not wage a public battle against Bank Leumi; while on the other hand, the ministry took a moral stance and opposed Brodet’s pay hike at a time of cutbacks in the economy…Read More>>

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