Elliott Welcomes Imminent Bezeq Board Overhaul and New Era for Strong Independent Governance
Elliott Advisors (UK) Limited (“Elliott”), which advises funds which collectively hold a significant economic interest in Bezeq The Israeli Telecommunication Corporation Ltd. (“Bezeq” or the “Company”), welcomes the proposed governance reforms announced by Bezeq last night.
In its initial letter to Bezeq Interim Chairman David Granot, dated January 16, 2018, Elliott outlined the urgent need to address the Company’s serious corporate governance issues, and called for changes at the Board level that result in “the right mixture of expertise, independence and integrity for the future.” Elliott stated then, and reiterates now, its belief that “there is significant value to be unlocked if the right steps are taken to improve its corporate governance.” Bezeq has strong business fundamentals, an exemplary workforce, and great potential.
Following yesterday’s announcement, Elliott highlights the changes that have occurred since January 16th. Taken together, these amount to a revolution in the company’s governance, and have set precedents for the assertion of good governance principles and shareholder rights in Israel. Specifically:
- Directors implicated by a troubling, ongoing investigation have either resigned from the Board or will not stand for election at the shareholder meeting.
- The new Board will be comprised of a majority of independent directors, unaffiliated with B Com. This will be the case whether shareholders vote in favour of Bezeq’s proposals or Entropy’s proposals at the upcoming shareholder meeting.
- The quality of the candidates on the independent and external director lists are in general very high. There are a number of business leaders of significant independent standing, including former chairmen and CEOs from within the telecom and other industries. Whatever the outcome of the elections, we can expect the board to include a strong mix of independence, experience and integrity.
- The previously dominant role of B Com in nominating directors has been dramatically reduced. Historically, in practice, this single non-majority shareholder hand-picked all Directors with no regard for independence or experience, and setting aside the open question of whether it had the right to make any nominations. Now B Com will nominate a minority of the board, and its candidates—as with all the Bezeq nominated candidates—are subject to review by an independent appointments committee. We further note that the composition of the nominees for Bezeq’s independent directors was made by this independent appointments committee, based on advice from a recognised executive search firm.
- The precedent has now been set for shareholders to be able to call special meetings at Bezeq. The clarification of this point by the Ministry of Communications has established an important safeguard against any weakening of Bezeq’s governance in the future. The recognition and affirmation of the rights of minority shareholders provide an essential check against the corporate malfeasance that has plagued Bezeq in recent years.
- It has been clarified that—other than for interim, temporary time periods—only a shareholders’ meeting has the power to appoint directors at Bezeq, which marks another important win for accountability.
As Elliott stated in January, Bezeq faces compelling business opportunities and significant challenges. A period of instability and dysfunction in the company’s governance is now coming to an end. Following next month’s general meeting, Bezeq will have a Board befitting a company of its scale and strategic importance. All stakeholders will be able to look forward with confidence.
Elliott Management Corporation manages two multi-strategy funds which combined have over $34 billion of assets under management. Its flagship fund, Elliott Associates, L.P., was founded in 1977, making it one of the oldest funds of its kind under continuous management. The Elliott funds’ investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, and employees of the firm. Elliott Advisors (UK) Limited is an affiliate of Elliott Management Corporation.
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