Israel's Business Moral Weakness: Are We Learning ?

Fron Ha'aretz front page: "A French court sentenced Israeli-Russian businessman Arcadi Gaidamak to six years in jail and 5 million-euro fine yesterday for his role selling arms illegally to the Angolan government in the 1990's..."

Reading the business papers the last few months in Israel and there are disproportionate number of articles reporting immoral executive behavior. I am worried about two moral issues: greed and fraud. Greed is a new accusation in Israeli business circles. Until this generation the country's businesses had a small fraction of the money we see today. Greed without the ability to "get the money" simply does not work. Fraud is also related to the amount of money involved but goes even deeper into the psyche and moral history of Israel. Let's look at greed in this article and cover fraud later.

Israel's incredible economic growth has brought a whole new class of problems. The first noticeable trend is a concentration of the money in a small group of people. Like the proverbial south America banana republic, Israel is made up of a few individuals and families who own a majority stake in companies and Real Estate. This is the first nouveau riche group in our long history as people. This new group now wants to live like the rich in the US and Europe. With life of luxury comes desire for more. As few succeed, many want to follow them. A race for more and to beat the "guy next door" results. Greed is the driving emotion to other forms of financial corruption.

On the positive side Israel is a small country and most business operations tend to be out in the open. Business newspapers and media are constantly looking for deals and reporting on changes in ownership of anything of value. Changes in management is also reported, there is always a story behind a change. Israelis also have the moral element not found in other countries. Here people really believe in the idea of working within the law and within certain moral guidelines. Unlike other places (the proverbial south America banana republic) there is no culture of corruption. What Israel does need is more business standards and legal structure. When Israel was established as a state and as the economy grew, the legal structure of financial control did not keep up. This is one place where association with the US and Europe is helpful. Financial and legal standards from developed countries is being adopted. Obviously Israel does not have the resources or the people to adopt everything, but the ones we need are beginning to make their way into the business world. Also, association with American and European financial markets is very helpful. An Israeli company with a NASDAQ registration needs to follow American financial reporting practices. Kobi Alexander of Comverse who tried to back date stock options and is seen strictly as a US legal issue here in Israel. While the company is certainly considered an Israeli success.

Greed is not going away in Israel or in other places around the world. It is being reported in the media, and is seen as a consequence of economic success here in Israel. Luckily we have strong press to keep a watchful eye. We also have a long history of moral standards to not ignore fraudulent behavior. Internationally Israel was the moral standard for a long time, now we need to prove our moral standards once again. Maybe Israel will be the example to other countries on how to handle greed. If we can't be an example, at least we can see it in all it's glory on the front page of Haaretz.