Analysts see the choice of directors appointed by shareholders of Bezeq Israel Telecom as a compromise between the controlling shareholder and institutional investors, and say the troubled firm now has what appears to be a more balanced and professional board that will be tasked to guide Israel’s largest telecommunication firm through troubled waters ahead.
A shareholders meeting on April 26 stipulated that Bezeq’s board of directors will be composed of a total of 13 directors, of whom 10 were newly elected or reelected, with three additional external directors, who were not up for re-election, remaining at their post.
“All the elected directors were either recommended by B Communications or that B Communications supported their election,” B Communications and its parent company Internet Gold — Golden Lines Ltd. said in a filling to the Tel Aviv Stock Exchange on April 27.
The makeup of the board was seen as pivotal by investors as a signal of whether Bezeq, whose controlling shareholder and executives are undergoing investigations, is setting out on a new road of improved corporate governance.
Bezeq executives and its controlling shareholder Shaul Elovitch, who holds a stake in the firm via units of his company, Eurocom Group, have been embroiled in investigations by the Israel Securities Authority and the police into connections between Prime Minister Benjamin Netanyahu, the Communications Ministry, and Elovitch. They all deny wrongdoing. Eurocom holds a stake in Bezeq via Internet Golden Lines and B Communications.
At the shareholder meeting held on April 26, votes were cast for the selection of directors at Bezeq, including regular directors that were nominated by the company and thus indirectly by the controlling shareholder; independent directors; a director designated by the employees; and external directors. A board where the majority of directors are not affiliated with the controlling shareholder is considered an independent board, and is a signal for investors regarding improved corporate governance at the firm.
A battle was expected to be fought out between the controlling shareholder, B Communications, and institutional investors over the identity of the external directors: if external directors are the candidates of the controlling shareholder, then the influence of the controlling shareholders over the board is that much greater.
“What we saw on Thursday during the election was a compromise over the appointment of the external directors,” said Shirin Herzog, head of the Mergers and Acquisitions, Securities and International Transactions Department in the Israeli law firm Ron Gazit, Rotenberg & Co. “One of the directors chosen was the top candidate of the Israeli institutional investors, but also supported by B Communications, while the second one chosen was the candidate nominated by B Communications, but supported by some of the institutional investors.”
“No side got everything they asked for,” said Herzog. “The result is a compromise that I think will work for the benefit of the Bezeq shareholders, which now appears to have a board of directors made up of professional people with relevant experience. It is a step forward for Bezeq. This board will now have to work jointly to tackle the significant work ahead of the company.”
Bezeq shares, which have declined some 10 percent this year — and dropped 29% in 2017 — amid the turmoil of the investigations and as the company faces increased competition in all its business activities, were trading 1.6% higher at 12:47 p.m. in Tel Aviv.
“It appears this board is more independent and more focused on Bezeq rather than the controlling shareholder,” said Roni Biron co-head of research at Excellence Nessuah, a Petah-Tikva based brokerage. “It looks like the board is made up of people with relevant experience. However, the business and regulatory challenges that Bezeq is facing are intact, and time will tell if the new board will be able to make a difference.”
At the shareholders meeting, the shareholders also approved the distribution of a cash dividend of NIS 368 million to Bezeq shareholders.
The new board is scheduled to meet on Monday and is expected to name Shlomo Rodav, who served as chairman of Bezeq from 2007 to 2010, as chairman.