To work only two months for a salary of about NIS 2 million? Most likely most of us would have signed such a deal. And this is indeed, more or less, what Ofer Bloch, the ousted CEO of the Shufersal chain, will receive, who was forced to leave his post this week after only two months. This is another one of those cases where a public company is willing to pay millions of shekels Appointed shortly before that to the senior position in the organization.
● From appointment to dismissal: Behind the scenes dismissal of Shufersal CEO, after only two months in office
● Meet the new CEO of the Shufersal chain
In recent years, a number of large companies traded on the Tel Aviv Stock Exchange, which operate in the fields of insurance, communications and real estate, have reported an early departure from the CEO appointed, along with huge payments to retirees. – Which brings us back to the case of Bloch.
In a laconic report delivered on Tuesday evening this week, Shufersal, Israel’s largest food chain, announced the end of the media dispute that had ignited two days earlier between the company’s board of directors, headed by new chairman Itzik Aberkhan, and CEO Ofer Bloch.
Bloch took over as CEO of Shufersal only about two months ago, but the writing about his dismissal was on the wall from the moment Aberkhan was elected, about three weeks ago, to the company’s board of directors at the shareholders’ meeting, and was later appointed chairman.
Abercrombie, “He served as the dominant CEO of Shufersal for many years, until his departure earlier this year (due to disagreements with then-chairman Yaki and Damani, who has since resigned), did not hide his dissatisfaction with the appointment of Bloch (who was brought by him and Damani) to the position of CEO.” L. Like the major shareholders in the company, Abercrombie was also interested in seeing in this role a senior figure from the world of retail – in which Bloch has no previous experience.
Despite the lack of trust between the two, the local capital market was surprised to find out how quickly Bloch’s expected departure turned into a forceful overthrow, in a decision made earlier this week “unanimously” by Shufersal’s board headed by Aberhahn – the same board almost half of Bloch Only about a month, and declared then that they “stand as a solid rock on the process of selection and appointment of Ofer.”
Bloch’s summons to a hearing before his dismissal alleged, among other things, that although he was given an opportunity, even though he did not have “the appropriate depth and experience in food retailing,” he “did not show leadership, leadership ability and professional hunger.”
Bloch did not remain obligated, and through the attorneys he equipped to ensure proper retirement conditions, argued in response that the hearing to which he was summoned was an “empty ceremony … the execution of a decision that had in fact been made, for foreign and improper reasons, by the company’s board of directors. The last thing that interests him. “
A day after the publication of the letters, which threatened to escalate into a legal battle, the parties reached a quick agreement on the end of Bloch’s term, which for his part waived the right to a hearing. According to the same summary, the dismissed CEO will receive the compensation approved on his terms of employment – six months’ salary (for prior notice and adjustment period), and in addition, “before the rule of law and as a gesture of goodwill”, he was approved an additional three-month adjustment grant.
In total, therefore, it is a question of nine months’ salary – compensation estimated at a cost of about NIS 1.6 million. Together with the salary paid to him during his short tenure, Bloch is expected to leave Shufersal with benefits with a total cost of about NIS 2 million.
Bloch, who previously ran a number of large companies in the economy, and for his appointment to the challenging and rewarding position of Shufersal CEO separate from the management of the IEC, would probably happily give up the whole event, not adding to the resume he would present to find a new senior position. In just two months, he was given benefits at a higher cost than he had earned for an entire year at the Electric Company (benefits at a cost of NIS 1.66 million in 2021).
Guest for a moment with NIS 1.6 million
As mentioned, Bloch joins other senior executives who in recent years have been forced to vacate their chairs earlier than expected, not before being upholstered in a “golden parachute” designed to numb the mental anguish – often beyond the payments stipulated in their employment agreement – the main thing to go. Those who absorb the price, whether it is a few million shekels or in exceptional cases of tens of millions of shekels, are the company’s coffers and the investors in its shares.
One of the exceptional cases of a CEO who did not serve a single day in the position, and still received compensation, is that of Gil Sharon, currently chairman of Bezeq, who was supposed to be appointed CEO of Discount Investments in 2015, then part of the E Group. Eduardo Elstein’s DB.
The employment agreement that was drawn up for Sharon – which reached DSK from the management of the cellular company Pelephone – was exceptional: compensation amounting to NIS 70 million over five years, mainly a package of shares of the group companies (including Cellcom and Shufersal) worth NIS 42 million. Sharp criticism from the media and minority shareholders at DSKS on the amount of the remuneration, Neot Sharon waived 40% of the remuneration, so that it would stand at about NIS 11 million a year.
However, even this “shrinking” proposal did not pass the test of DSKS’s shareholders’ meeting, and almost all Israeli investors, both institutional and private, opposed it. Sharon announced that he was resigning as CEO (And DSC has issued a statement that “The parties have reached a mutual agreement that it is appropriate to terminate the appointment process. This is due to its lengthening and many difficulties that arose during it, including gaps between the parties regarding the management approach required in the group.”
Sharon, as mentioned, did not leave DCSC empty-handed, and received monetary compensation of eight salaries, in the estimated amount of NIS 1.6 million. About NIS 60 million, with the sale of the company to Cellcom about two years ago.
Three months that ended with NIS 3.5 million
In contrast to Sharon, veteran insurance man Moti Rosen served a “perpetual period” of three full months as chairman of Migdal, and accordingly, the compensation he received upon his resignation was much higher. Rosen was appointed chairman of the insurance company controlled by Shlomo Eliyahu in early 2021, at the same time His appointment as the company’s CEO is the parent that owns it. It soon became clear that a strained relationship existed between him and the company’s CEO, Ran Oz, which erupted into a heated confrontation that made headlines.
After it became clear that the two were unable to work together, Migdal’s board decided to keep CEO Oz. Rosen was suspended in March, formally terminating them last April, “in the face of disagreements and unbridgeable gaps” between him and CEO Oz ( Who later left Migdal himself, in favor of managing the credit card company Isracard).
Rosen and Migdal did not part as friends: after several weeks of tension, the parties reached an understanding, which issued the retiring chairman with NIS 3.5 million in compensation. Which appears in the company’s remuneration policy), as well as compensation in the amount of NIS 1 million for a delay in approving his entry into the position.
The parties remain in dispute over additional payments that Rosen is demanding, and which relate to a non-compete period of nine months (at a cost of NIS 2.5 million), and compensation for damages caused to him and his good name by the company’s board of directors. These are currently being tried in court, after a mediation procedure between the parties was unsuccessful.
Capital compensation of NIS 17 million after one year
And there are also CEOs who retired with much higher sums in their pockets. One such is Avi Zvi (who previously ran the network television franchise), who was appointed CEO of Partner Communications in May last year, and ended his role laughing all the way to the bank.
A few months after Zvi took office (which he reached without previous experience in the industry), a deal was sold to sell the controlling shares in Partner to a group of investors led by Avi Gabay, who previously managed the competing company Cellcom, and Shlomo Rodev.
Following the transfer of control, and the entry into Gabay’s company with extensive experience in managing communications companies (he was previously also CEO of Bezeq), Zvi was forced to end his position in April this year, after less than a year in office and a month after the Ministry of Communications granted the new group control.
Unlike Bloch at Shufersal, who was forced to give up a capital reward worth millions of shekels upon leaving the company, Zvi was careful to include in his terms of employment a clause that allows immediate maturation of the options and restricted shares granted to him generously, in case control of the company changes.
Thus, Zvi ended an episode of less than a year as CEO of the cellular company, with a total amount estimated at NIS 20 million (NIS 3 million for salary, grant and payments for his retirement, and capital compensation Estimated at NIS 17 million).
More than NIS 20 million for every six months
Eyal Lapidot, who served longer than the others, and also received much fatter rewards, came in and stormed the Shikun VeBinui group at the end of just one year, with rewards costing about NIS 45 million.
Lapidot began serving as CEO of Shikun VeBinui in early June 2019, after being approved one of the highest remuneration packages ever for an employee manager in Israel, which was mainly based on a package of options that, when fully exercised, would constitute about 5% of the company’s capital.
Lapidot’s arrival at the company also supported Shikun VeBinui’s share performance at the time, given investors’ expectations that the esteemed and dominant CEO, who arrived at Shikun VeBinui after a successful decade as CEO of the Phoenix Insurance Group, will also be able to create value in Nati Saidoff’s real estate and infrastructure giant.
However, as mentioned, only about a year after taking office, Lapidot ended his term at the end of June 2020 – in the face of disagreements with the company’s board of directors, headed by then-chairman and current CEO Tamir Cohen, a trustee of controlling shareholder Saidoff.
The receipt with which he left also generated considerable capital for him: for half a year of work in 2019, Lapidot received rewards of NIS 24 million (of which NIS 17.5 million was share compensation), and for the following half year the cost of employment was NIS 21.5 million (including share compensation Of NIS 10.1 million and retirement payments of NIS 7.4 million).
“Sometimes paying a few million ‘is’ cheaper’ than leaving someone who is not needed”
Regarding Ofer Bloch’s retirement compensation at Shufersal, a senior attorney believes that it is sometimes worthwhile for companies to “pay a few million” to end the saga, and not be dragged to court – an event that could lead to image damage to the company. For if they come to court, the dismissed CEO will probably be required to prove that the decision to remove him from office was made in bad faith. According to the same attorney, “what needs to be checked in case of a decision to move a CEO is whether it is in the company’s best interest.
“I mean, it’s important to first understand if a decision was made here out of a conflict of interest, for example if someone said ‘this guy once when we were little kids gave me a blow, and this is the opportunity to give him back.’ “For the company, after the directors have reviewed the data and considered it, then the court will not intervene,” he explains.
According to the lawyer, “In principle, the Shufersal board was faced with the decision – we want Aberkhan as chairman and think he did a great job when he was CEO, and on the other hand there is the current CEO Bloch. If Bloch himself has said in the past that he cannot work with Abercrombie, then what does the board have to do? He has to decide who he prefers. Also, Shufersal’s recent financial results were not good.
It seems that the board of directors decided that it would be better for him to continue with Aberkhan, even if it would cost him a few more millions to be paid to Ofer, otherwise the parties would probably have been dragged to court, for all that that entails. “
The lawyer further claims that “the most trivial thing is to check the person’s record and his experience even before he has been appointed to the position. The CEO of the Electric Company is not responsible for the CEO of a retail chain. “Sometimes paying a few million more is ‘cheaper’ than leaving someone who is not needed.”