Nice board confronts institutional backlash over $9M CEO payout
Institutions prepare for this week’s vote after the company bypassed shareholders to grant former CEO Barak Eilam a $9m package.
The battle institutional investors are waging against overruling, a practice companies use mainly in executive pay, has now reached Nice, the Israeli software giant traded on both the Tel Aviv Stock Exchange and Nasdaq at a market value of ₪31.2 billion ($9.3 billion), making it the eighth-largest company on the TASE by market capitalization.
A general meeting of Nice will be held this Tuesday, during which shareholders will vote on renewing the terms of seven of the company’s eight board members, five regular directors and two external directors.
Although this meeting is part of the company’s annual routine, it carries unusual weight. It is the first such vote since July 2024, when Nice’s board of directors decided to bypass shareholders’ objections and grant former CEO Barak Eilam a capital compensation package of restricted shares worth about ₪30 million ($9 million).
At the July 3, 2024 meeting, shareholders had rejected a proposal to award Eilam 50,000 restricted shares following his retirement, despite his 25 years with Nice, 10 of them as CEO, during which he earned roughly $125 million. Eilam announced his retirement in May 2024, stepped down at the end of December, and was slated to advise the company until June 2025. Four days after shareholders rejected the package, the board announced it would proceed regardless, slightly modifying the terms but ultimately granting the shares.
Most Israeli institutional investors, who together hold about 11% of Nice’s shares in a company with no controlling shareholder, opposed the award. This week’s meeting gives them a chance to challenge the board directly.
Calcalist has learned that many Israeli institutions plan to vote against renewing the terms of all seven directors, some of whom have served for over 20 years. “Anyone who raised their hand in favor of overruling is problematic for us to approve,” a senior official at a large institutional body told Calcalist.
Nice chairman David Kostman, himself up for re-election, has been lobbying institutions intensively to change their stance. In calls with investors, Kostman warned that rejecting a majority of the board would paralyze the company at a time of existential challenges, including artificial intelligence. “The company needs quiet to operate,” he reportedly said.
Kostman defended the board’s decision, arguing that the equity award compensated Eilam for staying on to manage the transition to new CEO Scott Russell. He also stressed that the board had slightly revised the terms in response to opposition, meaning it had not “completely disregarded” shareholder views.
But institutions remain unconvinced. Some resent that Nice is reaching out only on the eve of the meeting after a year of minimal engagement. It’s puzzling that a giant company like Nice is run like a local community center, one investor said.
Shareholder Landscape
According to Bloomberg, Nice’s largest shareholder is U.S. firm Borrow (4.4%). The biggest Israeli institutional holders are Migdal Insurance (3%), Menora Mivtachim (2.7%), Phoenix (2%), Clal (1.8%), and Harel (1%). Israeli investment houses also hold small stakes.
Although Israeli institutions lack an absolute majority, under Israeli law they are required to participate in the vote, giving them disproportionate influence compared to foreign institutions. ISS, a global proxy advisory firm, has recommended supporting the board’s renewal, while Israeli advisory firms flagged the overruling issue but avoided giving a clear voting recommendation. Some foreign shareholders may also oppose renewals.
Among the directors up for re-election are Kostman, who has served since 2001 (chairman since 2013); Rimon Ben-Shaoul, former CEO of Clal Industries (since 2001); Shuki Ehrlich, former Giza executive (since 2012); Leo Apotheker, former SAP CEO (since 2013); Joe Cowan (since 2013); Dan Falk, former Sapiens and Discount executive (external director since 2001); and Yocheved Dvir, also a director at Menorah Mivtachim (since 2008).
Since Eilam’s retirement, NICE shares have fallen about 25%. Russell is trying to restore investor confidence, partly through a $955 million acquisition of German AI firm Cognigy announced two months ago.
The dispute comes amid growing institutional pushback against overruling. Regulators formally tightened rules in December 2024, after years of widespread use of the mechanism to sidestep shareholder decisions on executive compensation. In recent months, institutions have already blocked at least six directors from renewing terms at other companies.
If Israeli institutions succeed in removing Nice directors, it would mark a new escalation, and a sharp warning to other Israeli firms that the era of unchecked overruling may be ending.
