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Retired justice Victoria Austrovski-Cohen will complete her tenure as chair of Israel Discount Bank's stock committee in two months, a position she has held since the early 1990s.

The committee's job is to represent the state at shareholder meetings and to appoint directors.

Stock committees in state-owned banks -

Israel Discount Bank (TASE:


) and

Bank Leumi Le-Israel(TASE:


) - were established after the bank shares scandal of the 1980s. They are designed to preclude the state from abusing its status as the largest shareholder by intervening in appointments and routine bank operation.

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Austrovski-Cohen's impending retirement is a good opportunity to review the role of the stock committees and reconsider their necessity.

Looking at Discount Bank's performance during Austrovski-Cohen's tenure, we find that the bank deteriorated seriously, eroding its equity by huge losses in real estate. It was reduced to the point of being forced to sell off its greatest asset, Discount Bank New York, in order to sustain its routine banking operations.

The bank has become so battered that last week, international credit ratings agency Standard & Poor's downgraded it to BB, a problematic rating that prevents international institutional investors from holding Discount Bank shares or granting it credit lines.

The responsibility for Discount Bank's erosion lies first with its managers and directors in those years, and most certainly not with Austrovski-Cohen. Nonetheless, one can wonder if the retired justice's stock committee did everything possible to properly represent the Israeli public - Discount Bank's stockholder - at shareholder assemblies.

The shareholders' assembly approves the banks' financial reports and sets the chairman of the board's salary and bonuses. The assemblies should determine that the managers did everything they could to rehabilitate the bank, invested tremendous efforts in its recovery, and did everything necessary to prevent its deterioration.

If the assembly feels the board of directors did not fulfill its function, it can and even must replace the directors, including the chair.

In addition, the shareholders meeting and stock committee can force directors to clarify how the bank is run, and what problems it faces.

In other words, the stock committee's job is to serve and act as the bank's owners. Judging by where the bank is now, the committee failed to prevent its deterioration. Austrovski-Cohen passes her seat to her replacement in badly tattered condition.

Yet the conclusion is not to disband the stock committee. It serves as a buffer between the government and the bank, a very important function note the scandal of Industry and Trade Minister Dalia Itzik's political appointment of ex-Labor parliamentarian Ra'anan Cohen as chairman of the Industrial Development Bank, despite his total absence of banking experience.

It appears that the necessary action is in fact strengthening the committees, maybe even granting them additional authorities that will allow the state to maintain the assets and improve them before privatizing the banks. The future role of the Discount Bank and Bank Leumi stock committees is preventing perpetuation of the managers' sole command and forcing management and directors to provide stockholders with explanations. No one can do that but them.