After backlash over dividends, Fox says it will forfeit millions in state aid

Fashion chain Fox announced Friday it will forfeit an estimated NIS 13-18 million ($3.8-$5.2 million) in promised emergency government aid, after the clothing retailer met intense public backlash for its decision to award NIS 49 million ($14 million) in dividends to shareholders.

Fox Group CEO Harel Wiesel said the fashion giant had seen “a significant increase in activity” since stores reopened, justifying the dividends. For this reason, Fox Group would renounce all government grants, he said.

Wiesel’s holdings company owns 25 percent of Fox stocks, meaning he is set to personally benefit greatly from the dividend.

The announcement came shortly after Finance Minister Israel Katz tweeted Friday morning: “The decision by the owner of Fox to withdraw a high dividend to his own pocket at this timing, an hour of crisis and hardship, and following all the aid he and other employers received for the justified purpose of bringing employees back to work, is grating and the opposite of the solidarity one would expect. I appeal to him to immediately to cancel the decision.”

Wiesel had led the campaign by large businesses, which included threats of continued closures of large sectors of the economy, to secure NIS 6 billion ($1.7 billion) from the government to help hundreds of large businesses return employees to the workforce.

Politicians from across the political spectrum had expressed outrage at Fox’s dividend plan.

“This is swinish capitalism at its most brazen,” Economy Minister Amir Peretz (Labor) tweeted. “After bringing back hundreds of workers on a part-time basis [only], he is paid from the state coffers and takes tens of millions into his pocket.”

Likud MK Shlomo Karai was also furious. “The crocodile tears Wiesel shed everywhere have become diamonds, at our expense.”

MK Bezalel Smotrich of the opposition’s Yamina tweeted: “The fastest ‘Told you so’ ever. This was not the intended purpose of the huge sum provided to support businesses during the coronavirus crisis.”

Yamina had attempted to include a clause in the grant plan that would have forbidden dividends in 2020, but was overruled.

Karai said, “We compromised at the Finance Committee on amendments and improvements to the benefits model so as not to delay it, and to save independent businesses, and we’ve received a slap in the face in return.”

Labor MK Merav Michaeli sent a letter to Katz demanding that he freeze all grants to Fox and to set conditions to receive the aid. She said the government should “act immediately to ensure that grants or loans and any other financial aid from public funds will be conditioned on an obligation not to hand out dividends and not to raise [management’s] salaries for at least two years.”

MK Micky Levy of Yesh Atid-Telem blamed the government, saying he too had sought changes to the grants program, including a NIS 6 million ($1.7 million) ceiling to any one business, but “the government and its representatives shut their ears and opposed any changes.”

“Unfortunately the government obduracy that has been on display throughout the economic crisis has brought about this ugly and unbelievable result,” Levy said.

The government decision in late April to distribute the funds to large businesses came after major chains refused to reopen since they hadn’t received the same level of government support that small businesses and self-employed Israelis got.

The major employers had applied intense pressure on politicians to compensate them as well as small businesses.

Wiesel, in response to the umbrage, on Thursday told Channel 12: “The company is distributing to shareholders, of which I am just a small part, 50% of its profits, and no more than that. When the shutdown was decided on in March, in an unusual move, we informed the stock exchange that we were freezing the distribution of dividends that we had announced, because we didn’t know how long the economy would be closed.”

“Since the stores opened, there has been a significant increase in sales and we decided to cancel the freeze,” Wiesel said. “When the stores closed I announced that I was giving up 100% of my salary, and only after I brought back the last of the workers, out of 8,500 that I employ, I announced that I would start to receive my salary again.”