Modest Suggestions

Some suggestions for the Pyramids:

The one’s in Israel that is, not Egypt.

It is a understood that the two things that must be fixed in order to prevent a slow or not so slow descent into the serfdom of the twin brothers, socialism and crony capitalism, is to deal with government regulations and the Israeli conglomerate (see below for the third reason).  This is not to bash our (much) wealthier brothers but the fact that your father made a lot of money (Dankner - take a look at his "positions") does not mean you can manage multiple businesses in multiple sectors.  And the fact that you are a self made man (Teshuva - this is a man I respect but even so...) also doesn’t mean you can manage companies as diverse as retail sales of automobiles and drilling for natural gas.

Let’s face it – for the good of freedom and the good of our prosperity something must be done.  As for regulations, there are volumes that need to be written and we will deal with that in time.

Here are some modest suggestions regarding the crony capitalists (besides the already proposed separation of industrial from financial companies):

1.        Define a Holding Company in law as one that cannot hold other holding companies.  No more grandchild companies and certainly no more great-grandchild companies. 

One of the main problems with these multi-level corporate structures is that it takes away from the competitiveness of the company and therefore hurts both the minority shareholders as well as the consumer. 

2.       Change the bankruptcy laws to include “Chapter 11” type laws and to give bondholders primary access to assets before, or at least equal to banks.

Currently, bankruptcy laws lack a “chapter 11” equivalent meaning that companies either close or disappear.  There is no chance for it to work out its problems and emerge from bankruptcy.  There reason for this leads us to the second problem – that the banks have primacy in all bankruptcy dealings.  They must get paid in full before any other creditors are dealt with.  This puts bondholders at a clear disadvantage when dealing with the debtor.  We have seen this clearly in the past few months as Ben-Dov has manipulated these laws to hold onto a company that is no longer rightfully his. 

3.       Don’t let pension funds agree to bond “haircuts” unless 2/3 of the pension owners agree in a proxy vote.

This works only after our previous point is taken care of.   The market in Israel is too small and too close to allow the fund and money managers this much power.  They are often good friends or even employees of the very corporations that ask (demand) these haircuts and the actual beneficiaries of the pensions should have to approve these deals.

4.       Don’t allow the purchase of more than 5% of any publicly traded company with debt.

This goes totally against my grain.  I don’t usually see a problem with (well managed) leverage in making large purchases.  However, it is pretty clear that the purchase and sales of companies in Israel by the conglomerates is more of an ego game than a business decision.  And if someone wants to play games he should do it with his own money – not those of my pension.

Next …. The third leg of high prices and government inefficiency – the unions.