February 19, 2020

Gil Sharon's Windfall: Improvement vs. Exaggeration

Calcalist – February 19, 2020

Gil Sharon's Windfall: Improvement vs. Exaggeration

In the transaction for the acquisition of Golan Telecom by Cellcom, there is one significant winner: Golan Telecom Chairman and CEO Gil Sharon. Sharon owns 10% of the shares of the cellular companies, for which he is expected to get NIS 59 million

Yarden Rozhansky

In the transaction for the acquisition of Golan Telecom by Cellcom, there is one major winner: Golan Telecom Chairman and CEO Gil Sharon. Sharon owns 10% of the shares of the cellular companies, for which he is expected to get NIS 59 million. To a large extent, the amount Sharon will get from Cellcom, which is controlled by Eduardo Elstein, is some sort of "compensation" for another transaction that has not been executed - his appointment as CEO of Discount Investments, which also is owned by Elstein. At the end of 2015, Elstein chose Sharon, then the CEO of Pelephone, to lead the company that controlled Cellcom, Property and Building Corp. and Shufersal. Elstein gave Sharon a generous and exceptional compensation package in the amount of NIS 71 million for five years.  The package was composed of a monthly salary of NIS 200 thousand, an annual bonus of up to 12 salaries, and a car worth NIS 450,000 as well as a compensation in shares: DSC shares worth NIS 13 million, and Shufersal and Cellcom shares worth NIS 30 million.

The exceptional compensation raised opposition among minority shareholders and board members, who demanded a dramatic cut. Meir Shani, one of the IDB external directors - then still the controlling shareholder of DSC, and presently an affiliate company - even resigned in protest. The agreement was not approved by the board of directors, and Sharon agreed to waive 40% of the equity compensation, but that was already too late. Elstein withdrew the appointment.

In 2017, Electra Consumer Products acquired Golan Telecom for NIS 350 million. As part of the transaction, Sharon was appointed chairman and CEO, and purchased 10% of the shares for a nominal amount of NIS 2 million. Under his management, Golan Telecom has grown significantly. As of the end of the third quarter of 2019, the number of subscribers was 923,000 - an increase of 17,000 subscribers compared to the end of the second quarter. Revenues for the quarter rose by 6% and amounted to NIS 137 million. Golan Telecom ended 2018 with a segment profit of NIS 92 million - a 29% increase compared to 2017, the year in which Sharon took office.

Although the amount that Sharon will get from the Golan Telecom sale is similar to the amount he ultimately did not receive from Elstein, this is where the similarity ends. While in the case of DCS, he was supposed to get shares of companies he was not supposed to manage, in exchange for achieving milestones which can be qualified as "non-challenging" entropy, in the case of Golan Telecom, Sharon is reaping the fruits of his labor. He improved the company so that the amount reflects the value he was able to add to the company. When executives pocket large sums of money, this draws media attention, but no case is the similar to another, even when it involves the same manager.

BACK TO THE TOP