“They put me in a position in which I was almost unable to refuse,” Eli explained later recalling the experience. “The bank was about to go bankrupt…. It held almost all the credit of the State of Israel, including the trading of state bonds.”
Yet he still refused, prompting massive pressure from a wide array of sources including phone calls from Israel’s prime minister and finance minister, who implored him to accept the position.
“You must!” he was told. “If we continue like this, it will be a disaster.”
In the end he gave in, “with a monumental lack of desire,” but immediately informed the board that he would not be leaving Teva to do so and “would spend half a day at the bank and the other half managing the group.”
“I inherited the position due to another man’s downfall,” he told the press, explaining his initial refusal to accept the position.
For many years he had greatly respected Japhet, whom he regarded as a professional banker of the highest caliber and worthy of his position at the helm of the country’s largest bank.
“It’s a bad feeling,” he told journalists at the conclusion of the board meeting in which he was selected as chairman. “It is no simple matter to decide to accept the resignation of a chairman with the vast knowledge possessed by Mr. Japhet.”
At the same time, he regarded the appointment as an issue of great national importance and as a difficult challenge. For Eli, who typically jumped at challenges, it was clear that the Israeli banking system, and Bank Leumi in particular, was in need of a period of calm to recuperate. The desire to achieve such calm, by means of an organized process in which industrial quiet played an integral role, was a major factor in Eli’s decision to accept the position.
Eli recognized that unlike his position as the president of the Manufacturers Association, his chairmanship of Bank Leumi would not leave him sufficient time to serve as the CEO of Teva, which was his major interest. He therefore immediately announced his imminent resignation from the presidency of the Manufacturers Association, as had been agreed upon beforehand, but emphasized that under no circumstances would he step down as CEO of Teva. For this reason, he also announced ahead of time that he would serve as chairman for a limited period of time – “no more than one term” – and declared what the board of directors already knew: that the bank would be run in practice by its CEO, Mordechai Einhorn, whom they had selected for the purpose.
“I intend to be an active bank chairman,” Eli clarified, “but I will not engage in the everyday management.”
•••
From May 12, 1986, onward, Eli was immersed in the management of Bank Leumi. The first few months was a period of overlap during which he gained even greater respect for Japhet and at the end of which he regretted not having the time to learn more from his predecessor.
He was a great banker…. We both read the same file of a manufacturer in need of credit. I thought he was eligible, but he rejected the request. “He has money for the short term,” he told me, “but he doesn’t have enough money for the long term and therefore you cannot give him a loan. The man’s risky.” I checked again and he was right. I would have never thought of that. I was lucky to have understood what he told me…. All the members of the board of directors respected and appreciated him and would stand up out of respect in his presence…. He knew each and every one of them, their wives and children, and their histories.
After Japhet left Bank Leumi, Einhorn handled the routine management of the bank. He was a skilled professional with extensive experience in banking and he worked tirelessly to stabilize the banking system and return it to the path from which it had deviated over the previous two years. Unequivocal evidence of the bank’s decline could be found in its relatively weak semiannual results, which reflected a drop in turnover and profit. Eli sought to reshape the bank’s strategy, negotiated with the government regarding its policies toward the banks, and took actions to ensure improvement in all possible aspects of the bank’s performance. In particular, he made successful efforts to preserve the bank’s credit rating, based on his concern that a drop in its credit rating would present the bank with even more serious problems.
I did not plan on dealing with all the bank’s problems. I wanted to get it back on its feet, to organize the board [of directors] as it should be…. I did this within a short time. “Guys,” I told them, “stop trying to impress me. You talk as if you have a strategy, but if you had a strategy none of this would have happened.” After that, I began trying to convince them to change their method and their organizational approach as well as to employ many more aides and to trust them.
Even so, it was only natural that Eli also had to make decisions regarding everyday bank management. During the corporate management meetings in which he participated and his frequent meetings with the managers and division heads, he delved into the dynamics of the bank’s routine operations. On these occasions, he voiced his opinion on different subjects and intervened in questions related to credit, interest rates, the attributes of potential borrowers, and other issues.
This appears to be why he was not proud of his work at the bank. Being a banker required adopting a different way of thinking and operating according to a different culture.
“You use your imagination less,” he explained, “not because bankers have no imagination, but because that’s how banks work. They must be cautious and take no risks, which is the complete opposite of how Teva operates. They had to be square, especially in those days, in the wake of the trauma.”
The fact that he had to wear a button-down shirt and tie to work, which was something he had managed to avoid as the CEO of Teva, was also a burden for the former kibbutznik from Tel Katzir. It is no wonder that after half a day’s work at the bank, he always rushed off to his office in Tel Aviv, which for him was his kingdom.
“Those were extremely unpleasant days,” he concluded. “I hated every day I spent at the bank.”
•••
Eli articulated his feelings regarding his work as the bank chairman when he was still in office. However, his sense of frustration was undoubtedly exacerbated by his experience dealing with the unfortunate matter of Ernest Japhet’s pension package. On January 2, 1987, Ha’aretz economic correspondent Nechemiah Strassler publicized the terms of Japhet’s compensation and retirement package, which sounded unnecessarily exorbitant to the public. At that time, a one-time severance payment of $4.4 million and a regular monthly pension of $30,000 were still unheard of by the Israeli public.
As it turned out, three members of Bank Leumi’s board of directors – manufacturers Israel Sakharov and Joseph Pecker, and Micha Efrati from Kibbutz Geva – had initially conducted negotiations with Japhet and had arrived at much higher figures. Shortly after beginning his term as chairman, Eli was presented with the terms of Japhet’s agreement with the bank, according to which the retiring CEO was eligible for a severance payment of $5 million and a regular monthly pension of $58,000. Eli was shocked by these figures and asked Japhet to reduce them somewhat. Japhet refused and Eli threatened to take up the matter with the board of directors to modify the arrangement.
“I felt he was receiving a great deal of money…. And although I thought he deserved more money than I did, I did not think the disparity should be as great as it was,” Eli explained with uncharacteristic cynicism, reflecting just how dissatisfied he was with the scandalous rate of Japhet’s pension.
He earned more than 100 times what I earned. At the time, Teva was a small company, but as far as I was concerned, it was still excessive. He was being represented by attorney Ori Slonim, who sought to reach a compromise. At a certain point, I told him: “I’m not paying. Sue me.” “Of course we’ll sue you,” Slonim responded. “How can a bank fail to fulfill its obligations?”
Eventually, Eli brought the matter to the bank’s board of directors and asked them to refrain from executing the agreem
ent. However, his request encountered firm opposition.
“I would have violated the agreement had the board not prevented me from doing so,” he recounted later.
Following concerted efforts to persuade him to do so, Japhet agreed to Eli’s request to cut his monthly pension by 50 percent and reduce his one-time severance payment by 20 percent. These somewhat lower figures also seemed exorbitant to Eli. However, he was convinced that the calculations on which they were based were consistent with the spirit of past agreements with Japhet and with his past salaries. He also recognized that Leumi’s former chairman of the board had made a reasonable concession. This seemed particularly true in light of the fact that members of Bank Leumi’s corporate management operating on behalf of Jewish Colonial Trust Ltd., a corporate entity controlled by the World Zionist Organization that held a 75% share in Bank Leumi, had already approved the previous agreements.
•••
When Strassler published the sums that Japhet was to be paid, the Israeli public was outraged. Beyond the fact that they were still “astronomical” by the standards of the day, they were also troubling in light of the fact that Japhet had been responsible for a crash that did personal injury to thousands of families in Israel.
“Not only has he himself not paid the price,” an economic correspondent wrote disparagingly, “but Bank Leumi has given him a prize.”
According to an editorial in Yediot Aharonot, he had received “a king’s ransom” that justified investigating “the reasons for approving a retirement and pension [package] three times greater than the salary of the president of the United States for a man who should be thankful that he is being allowed to walk away without being held responsible for the major crisis he caused the institution in his charge.”
The most outspoken on the matter, however, were the politicians, who used the episode as an axe to grind and vied to be the most outspoken on the matter. The most extreme in this context appears to have been Knesset member Mordechai Virshubski, who characterized the pension package as “robbery of the largest bank in the State of Israel.”
Eli was in agreement with the public outcry and realized he had made a mistake. He immediately attempted to rectify the error by quickly passing a decision of the board of directors to suspend Japhet’s retirement package for the time being, explaining that for legal reasons he had been unable to proceed in a different manner when he approved the arrangement, as this would have made the bank vulnerable to legal claims from Japhet.
•••
Strassler’s story in Ha’aretz marked a major low-point in Eli’s term as bank chairman. During his eight months in this position, his sense of unease swelled into what he referred to as “an ongoing nightmare.” He was now subject to attacks from all sides – in the media, in Knesset committee sessions, and in other public forums – for allowing Japhet to be awarded such a pension. Under the leadership of its militant chairman Louis Roth, Bank Leumi’s employees’ committee, which had long been demanding higher wages and better terms of employment, began a campaign of incitement against Japhet, culminating in a demonstration outside his place of work. When committee members burst into Japhet’s office during the demonstration, he chased them out screaming, all in front of the cameras.
One of Eli’s most difficult experiences during his time at Bank Leumi was the intervention of external forces, such as Knesset members, in bank affairs. One example was the summons he received to appear before several Knesset committees to explain why he had approved Japhet’s pension.
This was an attempt at political intervention [in regular bank operations]. Instead of sitting in my office, I found myself attending meetings of the Knesset Finance Committee…. Then I would have to go to the Economics Committee to be grilled. They have the time…. You can’t tell them, “I’m not coming.”
Even earlier, Eli had sought a way to conclude his term at the bank. As far as he was concerned, he had done his duty and made his contribution.
“Overall,” he recalled, “I felt as if I was making progress. The bank looked much better than when I received it.”
Daily bank operations became a burden, but more troubling for him was the public mood he faced after Strassler’s story. “Eli Hurwitz’s Ski Vacation Must Be Stopped,” the headlines of one evening paper blared, while another journalist observed that the public saw Eli “as someone who covered up corruption.” The nightmare reached a head and ultimately came to an end after Strassler published a second investigatory piece in Ha’aretz, which stated that Eli had negotiated with Japhet regarding his pension rate and that Japhet had not determined the figures on his own as had hitherto been believed. Although Strassler’s second piece noted that Eli had succeeded in cutting Japhet’s monthly pension in half and approved it only after realizing that he had no legal means of refusing, both the author and public opinion still regarded the amount of the pension as unacceptable. In this context, the public campaign against Eli grew even more extreme. If previously Japhet had been directly attacked for his retirement package, after Strassler’s second report, Eli was personally and brutally targeted for allowing it to happen. Under these circumstances, on January 13, 1987, he announced his intention to resign his post.
“I made a few errors, particularly in the public realm,” Eli acknowledged with regard to his decision to resign. “I take full responsibility for the view that guided me and for my own personal failures and those of the board of directors…. Today, it is clear to me that we erred on the public level [in awarding the compensation to Japhet] and I know that responsibility [for this error] lies with all of us and with me in particular. That being the case, I have no doubt that it is incumbent upon me to resign immediately.”
In another article in Ha’aretz, after asking Eli to comment on his resignation, which was so atypical of the Israeli experience, Strassler wrote, “Eli demonstrated a spirit of sportsmanship, proclaiming with an air of acceptance, “achalti ota [literally, I ate it]’” This was also the headline of the article published the following day in the morning paper. Strassler was so taken by Eli’s words on this occasion that he incorporated them into the eulogy he wrote for him over two decades later. On the same occasion, the veteran journalist shared another thing that Eli had once said to him that was extremely typical of Eli’s optimistic character.
“When I saw him years later,” Strassler recounted, “Hurvitz told me with a grin: ‘You are to blame for the growth of Teva. You are to blame for my leaving Bank Leumi and moving to Teva full-time…’ So maybe it was a blessing in disguise – instead of a run-of-the-mill banker, we got the number one industrialist and entrepreneur in Israel.”
•••
On July 5, 1987, half a year after Eli resigned his post at Bank Leumi in a fury, Yediot Aharonot ran a short piece on one of the newspaper’s inside pages that contained the following two sentences:
Eli Hurvitz, who served as the chairman of the board of directors of Bank Leumi, donated the salary he earned during his short time in this position to care for the elderly. He informed Jerusalem Fund Director Ruth Chesin that he decided to donate half of the money he had earned – 30,000 shekels – to the elderly in Jerusalem. He donated the other half to the elderly in other parts of the country.
Chapter 17
Teva’s Final Acquisition in Israel
Eli saw the stormy conclusion of his time as chairman of the board of Bank Leumi as the beginning of a new path. He returned to Teva, pledging to allow “no one to distract me from it,” certainly not for half of his total working hours, as his position at the bank had done. Through it all, however, he never neglected his responsibilities managing the group. Throughout the 1980s, even during the high point of his work as president of the Manufacturers Association or during his time at Bank Leumi, half of his day was always dedicated to Teva. It was during this period that, under Eli’s leadership, Teva entered the US market. However, he also constantly felt that he was n
ot dedicating himself completely to the pharmaceutical company as he had in the past. The trauma he had undergone during his banking experience served as a cogent lesson for the future: public service demands an abundance of emotions, is potentially exhausting, and can impact a person’s work in other professional settings as well. He would not let this happen again.
For Eli, it was back to work. From now on, his top priority would be Teva and Teva alone. He returned to being a full-time CEO and threw his energy into all aspects of the group’s management. In addition to his intensive contacts with members of the corporate management, he also dedicated time to the workers. He also resumed his frequent visits to company factories, production lines, laboratories, and offices, making an effort to make a surprise visit to one almost every week.
At each visit, he received a warm welcome. According to Shmuel Zeligman, who served as the group’s accountant for decades: “The employees of Teva always took pride in their allegiance to their company…. They felt like family…. They thought of Eli as their ‘father.’” Indeed, for the employees of Teva, Eli became much more than a CEO. He represented them and they were proud of him. Over the years, in his lifetime, he would attain almost mythological status. One nickname for Eli that was prevalent among Teva’s employees was “Prime Minister,” in the positive sense of the term.
He spoke to us as equals … with a perpetual smile on his lips…. When he got angry – which happened at times – we knew he was right and if he wasn’t right, he could be argued with…. He was tough, direct, and straightforward…. We were not afraid of him. He was not authoritative, but … it was clear that he was in charge, the authority, Teva’s man.
The anecdote about the chief pharmacist who yelled down the hall how he was “going to stop by Eli’s and really give it to him” became legendary in Teva’s corporate culture.
Eli Hurvitz and the creation of Teva Pharmaceuticals: An Israeli Biography Page 28