Sources inform ''Globes'' that the Israel Securities Authority is examining whether Bank Leumi (TASE: LUMI) followed proper procedures in the approval of NIS 22 million in executive bonuses.
Bank Leumi president and CEO Gali Maor received a bonus of NIS 3.46 million; chairman Eitan Raff received NIS 2.46 million; and 13 other executives received an aggregate NIS 15.85 million.
Bank Leumi’s board of directors and audit committee approved the bonuses. The Securities Authority asked Bank Leumi legal counsel Adv. Dalia Tal for the minutes of the board meetings that approved the bonuses, as well as all documents sent to the directors on the subject.
Bank Leumi has asked for an extension of one week, and the Securities Authority is due to receive the material by Thursday.
Bank Leumi said in response, “Bank Leumi’s directors approved the compensation on account of 2006 profits, after the audit committee and board, which comprises solely external directors, reviewed and discussed the subject without the participation of the parties involved. The compensation was fully disclosed with maximum transparency, in accordance with maximum compliance with the Securities Authority’s guidelines, via announcements to the public and the media. These reports detailed at great length the amounts, the beneficiaries, and the reasons for the compensation. Leumi will be happy to cooperate with any entity that wishes to review the matter.”
According to information under examination, some of the bonuses were distributed from one-time profits on the sale of mutual and provident funds, and not from growth in revenue and profits. For the sake of comparison, Bank Hapoalim (LSE: BKHD; TASE: POLI) and Israel Discount Bank (TASE: DSCT) did not include their revenue from the sale of mutual and provident funds in calculating bonuses.
The Securities Authority is demanding a report that will disclose the justification for the distribution of the bonuses, and wants to examine the link between the compensation approved and the improvement in Bank Leumi’s performance. The Securities Authority also wants to clarify whether the directors properly examined the compensation calculation for the executives under these circumstances.
Bank Leumi recently posted its largest-ever profit, NIS 3.53 billion, for 2006. This profit includes NIS 2.08 billion in one-time profits from the sale of its stake in Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY) and part of its stake in Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), the sale of Psagot Management of Mutual Funds - Leumi Ltd. and Leumi Pia Trust Management Co. Ltd., and of some of its provident funds.
Published by Globes [online], Israel business news - www.globes.co.il - on April 10, 2007
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