The mess at the top of Migdal continues to break records, and no one in the capital market seems surprised anymore. Now, for the seventh time in three years, the identity of one of the two most senior executives in the insurance group – the CEO and chairman of the board – is coming up for discussion. During this period, four chairmen and no less than three CEOs left the company, and it seems that the turmoil at the top of one of the largest institutional bodies in Israel, which manages the public’s financial assets of more than NIS 290 billion, is far from over.
The insurance company is having difficulty appointing a new CEO following the struggles between the company’s controlling shareholder, Shlomo Eliyahu, who owns about 64.3% of the shares of the holding company that controls the insurance company, and the new chairman, Yiftach Ron-Tal, appointed by Eliyahu himself just under four years ago. Months. Globes puts in order what is happening in a company that manages the money of hundreds of thousands of Israelis.
Yiftach Ron Tal / Photo: Yossi Weiss IEC
What ignited the tension within Migdal’s board of directors?
Last summer, the current CEO of Migdal, Ran Oz, shocked the insurance company when he announced that he had decided to leave it after only two years in the job. Oz, who confronted Eliyahu several times during the two years he headed the company, Positions, and to be appointed CEO of Isracard. In Migdal, they set up a search committee, which was represented by three candidates – Eliyahu nominated Ronen Agassi, head of the business division at Bank Leumi, on his behalf; Chairman Ron-Tal supports the candidacy of Yadin Antebi, who currently serves as head of the Financial Markets and International Banking Division at Bank Hapoalim; and the third candidate is Sagi Yogev, until recently head of the general insurance division at Harel Insurance Company.
The search committee, which includes chairman and two directors Gabi Picker and Ronit Bodo, decided not to recommend Agassi, and it eventually withdrew its candidacy, so the controlling shareholder, who was left without a candidate on his behalf, decided to freeze the CEO appointment process.
The tension between Eliyahu and Ron-Tal is not just about the identity of the next CEO. NIS, and it is traded around NIS 5 billion, with only Phoenix and Harel before it, after not easy years in which its position in the insurance world weakened.
What has changed this past weekend?
Last Friday, the Commissioner of the Capital Market, Insurance and Savings, Dr. Moshe Barkat, decided to intervene in what was happening at the insurance company, while canceling the freeze on the appointment of the CEO. “Delaying or delaying the process of locating and appointing a CEO for the company may impair the proper management of the company. “Therefore, you are expected to act without delay to appoint a CEO to the company in an orderly and transparent procedure, while giving due weight and reasoned reference to the recommendation of the search committee set up by the company,” Barkat clarified in a letter sent to board members.
In his letter, although the Supervisor of Insurance refrained from making threats against Migdal, Eliyahu or the board of directors, the law allows him extensive authority to do so.
Moshe Barkat, Capital Market Commissioner / Photo: Rafi Kotz
What are Barkat’s powers to intervene in the tower?
Barkat has a wide range of measures and sanctions against those involved in the incident. He can remove from office senior officials, from the chairman and CEO and below, since the performance of the officers in the insurance companies may be examined before the beginning of their tenure, but also during it, and if a defect is found in their conduct they may be removed from office.
With Elijah the story is more complex. He does not hold a position in the insurance company, but serves as the chairman of the board of the holding company that controls it, so Barkat cannot remove him from this position. However, he can certainly revoke Eliyahu’s control permit in Migdal. Oded Sarig (who himself twice served as chairman of Migdal, and left due to disagreement with Eliyahu), transferred the controlling shares in Clal Insurance from IDB to Ne’eman.
If Barkat chooses such an extreme move, Elijah will be left with capital rights, but will lose his administrative rights and his right to vote on company affairs.
This is the last resort and doomsday weapon for Barkat, with a number of other steps besides it, such as the appointment of a special director on behalf of the Capital Market Authority, or the appointment of an accompanying factor to the existing management. This is because as a controlling shareholder, Eliyahu has a different responsibility compared to other shareholders, and therefore, at least dryly, he should be allowed to influence the identity of the CEO who is elected, so Barkat prefers to show the board a tower that he monitors, Does not take actual steps.
Why do senior executives continue to run for senior positions in the tower?
As mentioned, in the last three years, seven senior executives at Migdal have been replaced, including Eliyahu’s son, Ofer Eliyahu, who left the position of CEO in 2018. First, there are not many entities in the Israeli economy the size of Migdal, and running a company Every day.
On the other hand, it seems that many of those applying for a position feel that they have reached a glass ceiling in the current company in which they are employed, or have already left the workplace and are looking for a new job, so their very candidacy may indicate their current situation. This is the case, for example, with Yogev, who left Harel after the appointment of a new CEO, because he saw himself as a candidate for the management of the insurance company but was not elected. Hence, it is not inconceivable that in the economy there are many managers who are in between jobs, and would be happy to be appointed to the position of CEO of Migdal, even when the shadow of Elijah hovers above them.
What does Elijah do to keep the power in his hands?
Although Eliyahu suffered a loss in the struggle for the appointment of Agassi, it is not certain that chairman Ron-Tal will win the war. Above him is a board of directors that Eliyahu still controls, and which can make the chairman’s life very difficult. In a few weeks, five of Migdal Insurance’s directors are expected to stand for re-election, and Eliyahu, who is not a member of the insurance company’s board, has already announced that he intends to replace two of them.
Those who are supposed to vote for the identity of the directors of the insurance company are members of the board of directors of the holding company, and therefore, if Eliyahu makes a proposal to replace all five directors of the insurance company, all five who are part of the two boards will oppose voting on the board of directors. If he works to replace only two of them, he will gain the support of the other three and thus leave control in his hands.
What to know about the mess in the tower
Appointment of a new CEO
The controlling shareholder Eliyahu preferred Ronen Agassi, but this withdrew his candidacy; Chairman Ron-Tal supports Yadin Antebi of Bank Hapoalim, as well as former Harel executive Sagi Yogev, a candidate. The CEO who will be elected will be the fourth since 2018
Intervention of the Commissioner of the Capital Market
Following the removal of Agassi’s candidacy, Eliyahu froze the appointment process. Commissioner of the Capital Market Moshe Barkat ordered the board of directors to cancel the freeze
The Commissioner of the Capital Market can expropriate Eliyahu’s voting rights or remove his chairman, Ron-Tal. The law provides him with a variety of tools to create proper corporate governance in Migdal.
Elijah threatens the directors
The controlling shareholder of Migdal, who is not a director of the insurance company, wants to keep the power in his hands and replace two directors, if they do not align with his policy
The appointment of the CEO is the tip of the iceberg
Elijah, the veteran insurance man, prefers the company to stay in the insurance worlds; The chairman wants to develop the areas of investment and finance. The identity of the next CEO may signal where Migdal will move.