Ex-Politicians' Move to Stock Market: Lucrative Deals or 'Honey Trap'?

Following recent elections that have resulted in political deadlock, a number of new figures are expected to enter the Knesset, replacing outgoing lawmakers. Many former politicians, including ministers and even prime ministers, have historically transitioned to lucrative positions in the private sector, such as board chairmanships or advisory roles for companies. These roles offer former public servants significantly higher compensation than they earned in public service, while companies benefit from their influence and connections to navigate government corridors.

However, this transition is not always a guarantee of success. While some politicians bring valuable business acumen, regulatory understanding, and extensive networks, others struggle to adapt to the corporate world. Experts note that a politician's past influence does not necessarily translate to an ability to understand business operations, identify risks, or effectively oversee management. Some in the financial sector are critical, suggesting that the contribution of former politicians is often minimal, sometimes serving to legitimize small companies in risky new fields, with the expectation of easy money that often proves unfounded.

The article highlights several examples of these transitions. Former Interior Minister Moshe Arbel was appointed chairman of the public real estate and agriculture company Mahadrin, with an estimated annual compensation of NIS 3.4 million for an 80% position. Similarly, former Justice and Interior Minister Ayelet Shaked joined construction company Kardan Real Estate as deputy chairwoman and later chairwoman, with her annual compensation reaching approximately NIS 1.7 million. Kardan Real Estate's stock has reportedly risen about 55% since Shaked joined.

Conversely, the article details instances where such moves have not yielded positive results. Former President Reuven (Robi) Rivlin's tenure as president of Electreon, a company developing electric vehicle charging technology, saw the company's value shrink by about 66%. Former Prime Minister Ehud Barak served as chairman of the medical cannabis company InterCure for six years, during which the stock weakened by 33% by the end of his term.

Further cautionary tales include former Finance Minister Moshe Kahlon, who was appointed chairman of the non-bank financing company Yont Credit. His appointment was controversial due to the proposed high compensation, and later the company faced severe irregularities, leading to investigations and indictments. Kahlon eventually admitted to reporting offenses as part of a plea deal.

Other former ministers like Dani Naveh and Chaim Ramon also saw their companies' stock prices decline during their tenures. More recently, former Education Minister Yifat Shasha-Biton became chairwoman of the retail chain Mashbir La'Olim, but the company's stock has dropped nearly 50% since her appointment. In a reverse trajectory, former IDF Chief of Staff Gadi Eisenkot chaired the energy storage company Storage Drop before entering politics, during which time the company's stock lost nearly 95% of its value.

Experts emphasize that the risk lies not in appointing former politicians per se, but in appointing them for the wrong reasons. Boards of directors require professional expertise and judgment, not just prestige or connections. Hiring a politician for their name rather than their potential contribution can lead companies to acquire a brand rather than a capable director.