Bank Hapoalim Acts to thwart the salary celebration of underwriting company executives Working IBI Bearing the name of the bank, in which it is the second largest shareholder (about 27%). The bank sent a surprising letter in its sharpness to the underwriting company, in which it expressed resentment over the terms of the salary it seeks to approve for three of its senior executives – CEO Yaron Mozes and subsidiaries Ofer Greenbaum (CEO) and Shai Nevo (Deputy CEO).
According to market estimates, the bank’s unconventional move is expected to generate shock waves among institutional shareholders in IBI, and may even torpedo the approval of the move at the meeting, which requires a majority of minority shareholders. However, even if the general meeting does not approve the salary upgrades for the company’s senior executives, the remuneration committee and the board of directors of Poalim IBI have the authority to do so despite the opposition of the minority shareholders.
A summons to the meeting stated that the members of the Remuneration Committee discussed the conditions during three meetings, and all the members of the Committee were present at them. It was also written that the board of directors of Poalim IBI has two full meetings, at which it approved the policy unanimously.
After an excellent year in its business, against the background of the tide in the Tel Aviv IPO market, IBI Poalim, one of the leading underwriting companies in the capital market, recently convened a special shareholders’ meeting to approve a new remuneration policy, according to which the three NIS 22.3 million (approximately NIS 8 million of this amount for Greenbaum, NIS 7.5 million for Nevo and NIS 6.8 million for Mozes). At a cost of NIS 54 million.
This ownership includes the updated remuneration policy components of salary, grant, capital remuneration (options and restricted shares that will buy them 14% of the company’s capital) and dividend receipts in the subsidiary, where the underwriting activity is concentrated, and where each of the three holds 5% of the capital.
It should be noted that the original summons to the meeting was NIS 900,000 higher than the current one, and the above cut was made after contacts between IBI workers and the institutional bodies during the month, which led to a reduction in some of the options given to Greenbaum, the subsidiary.
As stated, Bank Hapoalim were not impressed by the “cut” in question. The scope of the benefits granted to senior executives, the bank claims in a letter sent through its attorney, Adv. Zvi Agmon, “is exceptional and inappropriate and harms the company’s shareholders, including Bank Hapoalim, with severe and disproportionate harm.”
Among other things, the bank conducted a survey and found that with respect to 2021, the three officers “receive an annual remuneration equal to almost 25% of the company’s revenues, and in terms of profit an amount that constitutes about 35% of the company’s profits.”
Beyond that, the bank also expressed resentment that the company “seeks to allocate shares of considerable value” to senior executives of the underwriting company, and that the move was not accompanied by an explanation, such as why this policy was set. According to the letter, the allotment “does not depend on any condition of success in the job”, nor does it preclude the receipt of dividends that the underwriting company will distribute during the five years in which the options will be blocked. “This dilutes the dividend yield of the shareholders from day one, while worsening their situation,” the workers note.
“Success is based on the ability of human capital”
The underwriting company, whose largest shareholder is the IBI investment house (about 30%), sent a letter of response signed by chairman Ron Weisberg, in which they explained that the relevant comparison group for the salary terms of the three executives is the underwriting companies in Israel, not companies Others in the economy.
“To the best of the company’s knowledge, most of the leading underwriting companies in the State of Israel are held, some at very significant rates, by their senior executives,” says Poalim IBI to Bank Hapoalim. Those executives, she continues, “accumulate personal profits both through salary and through dividend distributions and carrying the value of the company they own.”
The IBI workers also noted that underwriting companies, unlike other companies in the economy, do not require time, capital investment and the purchase of equipment to set them up. This is a company that needs senior officials with experience and connections in the field of underwriting. “Most of the company’s success is based on the ability, expertise and reputation of human capital,” the underwriting company notes in its response.
The underwriting company notes that the fear that arises from the fact that “in the absence of adequate remuneration and the creation of an effective tool for retaining managers, the leading officers will leave” is not an unfounded fear. It mentions the crisis that arose in the IBI workers in 2017, when the top of the company left.
The company’s CEO at the time, Erez Goldschmidt, left it along with other senior executives in favor of establishing a competing activity together with consultants Rafi Lipa and Gal Amit. “To Greenbaum and Deputy CEO Nevo. The new executives” managed to bring the company to record results and maintain its leadership, “the response letter claimed.
The underwriting company’s board of directors adds in the letter that options that are blocked for a period of five years constitute “a significant and important preservation component, since in the event of departure before this period, the officers will not enjoy even a share fraction.” The IBI workers urged the bank to change its position, and did not change as requested by the date of the meeting (held on Tuesday).
Exceptional conditions, or an excessive response from the bank?
In response to the storm in workers, IBI claimed this week a source in the capital market that the conditions that the company sought to approve for its senior executives are indeed exceptional. “It is impossible to turn the company into a money pump on such a scale. I believe this letter will make waves in the institutional investment committees and they will oppose and thwart the move.”
Another source noted that this is a very reasonable reward, certainly after the achievements of the underwriting company. A third added that the bank’s response was unusual, and that the financial results of the underwriters should be addressed. “In the last two years they have maintained a lead and seen it in their results. This is an underwriting company, they are not really exceptional in reward who want to give a name in relation to other underwriters.”
Another angle
The prosperity of Tel Aviv’s IPO market has yielded record rewards for underwriters
The peak year in Tel Aviv’s IPO market yielded record rewards for underwriters in 2021. The table of salary peaks in the underwriting market for 2021, compiled by Globes (which refers to public companies held by such companies), shows that the first place is held by Eyal Greenbaum, CEO. Epsilon Underwriting Company and Ofer Greenbaum’s twin brother are operated by IBI, with a transaction cost of NIS 6.8 million. In the next three places are three senior IBI workers, Ofer Greenbaum, Shai Nevo and Yaron Mozes, who last year received a reward of NIS 6.2 million each (a total of NIS 18.6 million).
Also prominent in the table are Udi Tobin, Deputy CEO of Epsilon Underwriting, whose employment cost amounted to NIS 4.7 million in 2021, Liran Razmovitz, CEO of Discount Capital’s underwriting company (NIS 4.5 million), Eliav Bar-David, CEO Leumi Partners has underwriters (NIS 4 million) that year, and Gil Calderon, CEO of Menora Mivtachim Underwriting (NIS 3.8 million).
The huge salary of the underwriters indicates, as mentioned, the exceptional prosperity experienced by the local IPO market in the last two years. For example, in 2021, IBI Poalim was involved in no less than 111 capital raising transactions, in which NIS 35.5 billion was raised for its customers. A year earlier, the company was involved in 114 capital raisings, in which NIS 31.7 billion was raised.
Poalim IBI ended the past year with a 38% jump in net profit, which amounted to NIS 42.8 million. This growth was due to a 54% increase in operating income, to NIS 110 million in 2021. This increase was mainly due to a substantial increase in capital issues, and in contents that are guaranteed underwriting, the profitability of which is higher. The underwriting company’s market value currently stands at about NIS 270 million, after the stock has doubled in value in the last three years.