Dear Clients,

We are delighted to present you with this review, which discusses the approval of remuneration policy for office holders and approval of terms of office of office holders despite the opposition of the general meeting, in light of several such cases we have handled in the recent period and the considerable experience we have acquired since Amendment 20 to the Companies Law, 1999 (“Amendment 20” and the “Law”, respectively) was enacted.

A review of the public reports of listed companies traded on the Tel Aviv Stock Exchange reveals that more than 40 public companies have approved a remuneration policy and/or terms of office and employment of office holders despite the opposition of the general meeting since Amendment 20 took effect in December 2012 through to August 2018.


The findings are as follows:




Analysis of findings:

  • Most of the cases in which the board overruled the general meeting pertain to the approval of the office holders’ remuneration policy (as distinguished from the specific approval of the terms of office and employment of an office holder). One may assume that the reason for this is that when approving the remuneration policy, the existence of “special circumstances”[1] is not required (a requirement stipulated in the Law with respect to the approval of the CEO’s specific terms of office) and the approval is part of a “regular procedure”[2] that does not include approval of the de facto terms of an office holder’s employment.
  • In nine companies, the remuneration committee and the board of directors approved certain amendments to the remuneration policy or terms of office and employment in an overruling decision after the results of the general meeting were received (the companies published an amended remuneration policy, which was attached to the immediate report regarding the reversal of the general meeting’s decision). Examples of amendments: lowering the bonus cap, definition of an additional threshold condition for entitlement to a bonus; definition of the timing of the CEO’s bonus; raising the exercise price of options; definition of a bonus mechanism that includes the setoff of losses for a limited period.At the same time, to the best of our knowledge, in some companies where decisions were reversed as described without the remuneration policy being amended, when the board was presented with a case for the approval of specific terms of office and employment in which some of the components were contested during the process of approving the remuneration policy, this was taken into account when determining the specific terms of office.
  • Some of the companies made amendments and added clarifications to the remuneration policy or terms of office and employment after the general meeting was summoned, before the results of the meeting were announced, most likely after communicating with material shareholders and after receiving feedback from parties advising to institutional investors.
  • A comparison between 2014 and subsequent years points to a certain reduction in the number of cases in which the general meeting was overruled.We believe that this is primarily the result of the fact that in 2014 the implementation of Amendment 20 was still in its infancy. There are also other reasons, such as a stronger alignment of expectations and improved ongoing communication between the companies and their shareholders, as well as weight being granted to the voting policies of parties advising to institutional investors and a dialogue being maintained with significant shareholders and their advisors on remuneration issues, after the meeting was summoned.These explanations may also be the reason for the relatively limited number of cases of absence of approval by the required majority in general meetings on issues pertaining to remuneration policy and the terms of office and employment of office holders (who are not controlling shareholders).
  • Almost half of the reversals of resolutions of the general meeting occurred in companies in the real estate and construction industry and in the investment and holdings sector.
  • In a small number of cases (9%), the general meeting was simultaneously overruled with respect to the remuneration policy and the approval of the CEO’s terms of office, which were consistent with the terms and conditions of the new remuneration policy.
  • More than 80% of the companies in which the general meeting was overruled have a controlling shareholder.
  • In a small number of cases board approval was not unanimous, with some directors objecting to part of the terms and conditions of the remuneration policy or terms of office and employment.
  • There is no uniformity in the scope and quality of disclosure by the companies on overruling the general meeting.
  • In general, disclosure pertaining to overruling the general meeting in dual-listed companies was made in their annual reports rather than in a separate immediate report.


Finally, we would like to note that the last word as far as executive remuneration is concerned was generally left to the board of directors of the company[3], and therefore one should not be overly deterred from overruling the general meeting in appropriate cases, for as long as this is done as part of an orderly, professional, well documented procedure and with the assistance of experienced consultants.


We are happy to be at your disposal for any questions or further information.


Shibolet & Co., Capital Markets Department, Amir Shachar, Partner




This memorandum was written with the assistance of Adv. Barry Rosenblum of the Capital Markets Department.


[1]  This term is a vague concept, and as such, the Law does not enumerate the circumstances. Neither does the explanation provided in the bill with respect to Amendment 20 shed any light on the boundary between proper and anomalous use of this power.

[2] On the basis of detailed reasons and after rediscussing the remuneration policy (section 267A(c) of the Law).

[3] The Law does not permit the general meeting to be overruled with respect to the approval of the terms of office and employment of a controlling shareholder or a director, or in a public second-tier (granddaughter) subsidiary.

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