53 • The Compensation Committee shall be composed of at least three directors, most of its members shall be Independent Directors, at least one of them shall possess Accounting and Financial Expertise, and the rest of its members shall be directors whose compensation is determined by law. Such committee shall also be chaired by an Independent Director. • The Board shall establish a Nominating Committee, chaired by an Independent Director and composed of at least three directors, most of its members shall be Independent Directors (the Audit Committee may also serve as the Nominating Committee). The Nominating Committee shall advise the Board on the Nomination Policy (and if authorized by the Board – shall form the Nomination Policy) and shall recommend to the Board (or – if authorized by the Board – to the shareholders) on Board candidates. • Any transaction of a company with a shareholder who holds at least 10% of the voting rights in such company, as well as any transaction in which such shareholder has an interest shall be subject to the approval of the Audit Committee and the Board (but a shareholders' approval, neither by a simple majority, nor by a Special Majority – as is the case with regard to transactions with a controlling shareholder(s), shall not be required). • As per the first addendum to the Companies Law (best practices), where the same person assumes both positions of the chairperson of the Board and of the Chief Executive Officer (or where both are related), it is advisable to appoint a lead independent director, with powers which are overlapping those of the chairperson. • Is not required to appoint External Directors. Commentary While it is evident that the proposed statutory amendments are necessary and are in line with common global practices, it is believed that further measures may and should be taken in order to stimulate and facilitate shareholder activism in Israel – especially by institutional investors: institutional investors should be more involved in the governance of publicly traded companies, at least in the appointment of directors in publicly traded companies in general and in publicly traded companies without a controlling shareholder(s) in particular. Our experience shows that, even with the establishment of an independent nominating committee, 4.
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