With the Israel-Gaza conflict in the backdrop, the 2023 Israeli proxy season scene is experiencing notable shifts. Typically, the Israeli voting season is less pronounced than in many other markets as meetings are spread out over the entire year. Many Israeli companies with a listing in the U.S. schedule their AGMs in the second quarter of the calendar year, while those with a sole listing in Israel are more likely to schedule their AGMs during the fourth quarter which is the busiest period for Israeli AGMs.
On November 22, 2023, in response to disruptions caused by the conflict, the Israeli Parliament approved the “Law of Postponement of Deadlines (Temporary Provisions – Swords of Iron)”, applicable to public companies. The law allows the extension of terms and deadlines for public companies. Namely, board of directors now has the authority to extend, by up to four months, an independent/external director’s term, authorization of the Chairman to serve as the company’s CEO, compensation policies, and transactions with controlling shareholders (which require approval every three years or any other specified period).
Furthermore, for AGMs with deadlines within the specified period (October 7, 2023 to January 7, 2024), companies can postpone their meetings by up to four months. In light of this, some companies have canceled or adjusted their meetings, while others have chosen to navigate through current challenges. Though it’s early to tell, according to ISS data, as of November 14, 2023 the total number of AGM meetings convened for the months of November and December 2023 is only around 25 percent of what has been typical in previous years.
A growing number of public companies are also reporting harm to their business activities, including cancellation of future projects, and other limitations due to regulatory directives and lack of employees. For example, Kfarit Industries, a compounds producer for the plastic industry located in an area which experienced direct damage in the October 7, 2023 Hamas attack, announced the loss of its VP of Business Development and one of its directors, as well as family members of other officers and employees of the company.
Some public companies have taken notable actions on executive compensation, with Hamashbir 365, Retailors Ltd, Castro Model, Brill Shoe Industries, and Golf & CO Group all announcing that their CEOs and Board Chairs will forgo part of their fixed compensation for 30 days or more. In addition, the CEO of Fox Wizel and certain officers are voluntarily reducing their fixed compensation for Q4 2023, with the possibility to extend based on the evolving conflict situation. Other companies like Paz Oil have removed one-time bonus proposals from their EGMs (Paz Oil’s special meeting was held on November 14, 2023), while Idomoo has decided to remove several equity compensation items from its annual meeting (held on November 2, 2023). Several companies have announced a reduction in work hours, sending employees on unpaid leave or waiving paid vacation days.
Separately, recent credit outlook adjustments have added to the complexity facing the Israeli market overall – with Standard & Poor’s affirming Israel’s AA- rating for the time being but projecting a 5-percent economic contraction in Q4 2023 and Moody’s/Fitch forecasting a 1.4-percent contraction in 2024. The country’s credit ratings are under review for a potential downgrade, and economic uncertainties stemming from the conflict appear to be impacting Israel’s corporate governance profile. While future adoption of further governance-related regulatory changes impacting AGMs remains uncertain, the upcoming months will likely be characterized by a dynamic interplay between corporate adjustments and geopolitical/security developments.
By: Liron Garfunkel, Theresa Khriesh and Elie Zenou, Israeli Research, ISS Governance
