State Comptroller Matanyahu Englman appealed today (9.11.23) to the government ministers and the Director of the Government Companies Authority with a demand to take out dividends from the government companies, which had already been declared in the sum of 2 billion NIS, in order to use them for the war expenses and for the residents of the Gaza Envelope and the other evacuees from the south and north.
A report was due to be published in the coming days on the issue of the withdrawal of dividends and the subject of the appointment of directors in the government companies. The report has not been published due to the war, but Comptroller Englman attaches importance to the publication of a specific audit that is relevant to the war period, so that the government ministers and the Director of the Companies Authority may rectify the defects immediately.
The Comptroller wrote in a letter to the ministers and the Director of the Companies Authority that "During 2022 11 government companies declared the distribution of dividends in the sum of 1.4 billion NIS and announced their intention to distribute a further 600 million NIS in 2023, i.e., the distribution of a dividend in the accumulative sum of approximately 2 billion NIS. This notwithstanding, the aforesaid audit found that only 85 million NIS had been distributed out of this sum from just one company. An examination by the Office of the State Comptroller found that as of 08.11.2023, the distribution of the dividend from the government companies had not yet been completed, so that the balance of the dividend declared by the government companies totaling close to 2 billion NIS had not yet entered the State Treasury".
Simultaneously with the question of the withdrawal of the dividends in the sum of 2 billion NIS to the State Treasury, the Comptroller also referred in his letter to the question of appointing officials at this time.
The Comptroller demanded to freeze the replacement of senior executives in the government companies until the end of the state of emergency. "It is appropriate to refrain during the war period from shocks in the senior managerial backbone and to maintain the managerial stability that exists in government companies whose activities have a broad impact on the Israeli economy", wrote Comptroller Englman.
These statements were written against the background of reports published recently relating to the intention to replace senior executives at management level in some government companies, such as the replacement of the Chairman of the Board of Directors of the Israel Postal Company.
On the other hand, Englman also clarified that the reality of the war emphasizes the need to appoint directors to the defense companies Rafael, Israel Aerospace Industries and ELTA. This is in view of the special importance of continuous and proper functioning in these companies, which are essential from the operational-security aspect during the war.
An updated examination by the Office of the State Comptroller found that as of 31.10.23 the appointment of directors on behalf of the State in the companies Rafael, Israel Aerospace Industries and ELTA had not been completed: 7 out of 12 directors had been appointed to Rafael; 8 out of 12 directors had been appointed to Israel Aerospace Industries and 5 out of 13 directors had been appointed to ELTA.
Discrepancies in the appointment of the Board of Directors were also found in the aforesaid report regarding other companies whose activity is significant from the civilian aspect during the war, such as the Israel Electric Corporation Ltd., the Mekorot Company Ltd., Israel Natural Gas Lines Ltd., the Ashdod Port Company Ltd. and more. In all matters pertaining to officiating directors whose appointments are due to expire shortly, it is recommended to examine the extension of their position at this time, until the end of the war.
Moreover, stated the Comptroller, immediate action must be taken to appoint a Chairman of the Board of Directors of the Israel Electric Corporation and to appoint missing directors and directors to replace those who will finish their term of office during the next month and a half. After the term of office of the presently serving directors expires, only one external director will remain on the Board of Directors.
According to the Comptroller, "Alongside the danger in paralyzing the activity of the Board of Directors of the Israel Electric Corporation, during the past year the majority of the company's managerial backbone was replaced, including the replacement of the following officials: CEO, Deputy CEO of Operations and Logistics, Deputy CEO of Manufacturing, Deputy CEO of Finance, Legal Advisor, Spokesman, Deputy CEO of Engineering Projects (the latter position has not yet been filled and a deputy operates in its place). Likewise, in January 2024 the Deputy CEO of Service, Marketing and Regulation will end his term of office and at the end of the first quarter of 2024 the Vice CEO and Deputy CEO of Network Services is also due to end his term of office. This massive replacement of the managerial backbone in the company highlights the need for and importance of proper action of the company's Board of Directors and filling all its positions.
The Israel Electric Corporation is the largest government company in Israel which holds non-current assets in the sum of approximately 86 billion NIS, and its annual turnover totals approximately 22 billion NIS and it employs approximately 10,000 workers. The delay in the appointment of a permanent and active Chairman of the Board of Directors affects the company's proper functioning and exposes it to negligence which is tantamount to a violation of the law and, as a result of this, financial sanctions".
The Comptroller concluded his letter stating that "In view of all the aforesaid, regarding the State expenses concerning the war and the care of the home front, it is urgent that the minister in charge of the Authority, the minister responsible for the company in each one of the government companies, the Minister of Finance and the Government Companies Authority act to distribute the dividends that were declared in the government companies.
Likewise, it is important to fill the positions of directors in the government companies whose activity is significant for the functioning of the Israeli economy in wartime, both from the defense aspect and from the civilian aspect, for the purpose of ensuring that resolutions are passed in a high quality and responsible manner, under conditions of uncertainty, while preserving, as much as possible, their financial stability.
This becomes doubly important with the appointment of directors in the companies Rafael Advanced Defense Systems, in the Israel Aerospace Industries and in ELTA Systems, which are companies that provide a response in the operational field during wartime and the appointment of directors to the Israel Electric Corporation, as it is responsible for the supply of electricity and the provision of service to millions of citizens on the home front, among them residents living close to the borders, to ensure that the economy functions properly.
Without the Board of Directors of the companies and the managerial backbone in the companies being fully staffed, there is a substantial concern that the companies will not be able to properly carry out the missions they are entrusted with.
This being the case, you must act immediately to fully staff the companies' organs in accordance with the law and the rules of good governance, among other things by means of examining the extension of the period of office of the existing directors in the relevant companies.
Furthermore, it is appropriate that during wartime, the existing managerial stability in the government companies whose activity extensively influences the Israeli economy be preserved, without causing shocks in the senior managerial backbone at this time".