Haim Shani and Shmuel Hauser 390.
(photo credit: Kfir Sivan)
The Committee on Strengthening Market Competitiveness’s final report contains
important recommendations, but does not provide any “magic solutions” to
over-concentration, Israel Securities Authority Chairman Shmuel Hauser said
“The problem of over-concentration will not be solved overnight,”
Hauser, who served on the 10-person committee, said at a public symposium on the
report at Tel Aviv-Jaffa Academic College. “These [recommendations] are
long-term measures, and their success depends not only on legislators and
regulators, but also on investors and the market itself.”
Hauser said the
ISA supported the bulk of the report, but criticized its conclusions on pyramid
structures. The final report proposed that existing companies limit pyramid
structures to a maximum of three public levels, but that new companies limit
pyramid structures to two levels.
The ISA believes new companies should
also be allowed a maximum of three levels.
The decision to prohibit four
levels of holdings is consistent with the committee’s view that gap companies
(in which the controlling shareholder’s voting rights exceeds their financial
share) must be contained, Hauser said. But he added that the gap between voting
rights and financial share is usually not large enough in the case of three
levels to warrant their prohibition.
Committee Chairman Haim Shani
summarized the report, emphasizing that his team did not set out to provide a
comprehensive solution to the problem of over-concentration, but rather was
tasked with delivering conclusions on three issues: pyramid structures;
cross-ownership of financial and non-financial holdings; and the sale of
government assets to private owners.
In its final report, which was
released February 22, the committee recommended enforcing separation of
financial and non-financial holdings by prohibiting control of financial
institutions by large non-financial corporations. It defined a large financial
corporation as one with at least NIS 40 billion in assets under management, and
a large non-financial corporation as one with at least NIS 6b. in Israeli sales
(or NIS 7.5b. for existing corporations).
Shani said the committee looked
at how the United States, United Kingdom and other English-speaking countries
had dealt with the question of cross-ownership. But he added that several other
criteria were taken into account, as “there are no clear guidelines you can just
copy from another country.”
On the topic of pyramid structures, the
former Treasury director-general said the committee focused on preventing the
future creation of “big, complicated” structures. “We heard enough
foreign investors say [our pyramid structures] were too complicated,” he
Another ex-Treasury director- general, Migdal Insurance Chairman
Aharon Fogel, slammed the government and the report, arguing that its
conclusions and other recent measures – such as housing reforms and increased
capital requirements for banks – would lead Israel into a “heavy recession” this
Fogel added that he is certain Prime Minister Binyamin Netanyahu
does not support the committee’s recommendations, but that in the aftermath of
last summer’s protests over the cost of living – largely directed against the
country’s most powerful businessmen – Netanyahu had no choice but to claim the
findings as his own.