Commercial Law Attorneys
Corporate Governance in Israel: Principles and Legal Framework
Corporate governance refers to the collection of rules, standards, and practices that govern how a corporation is supervised and controlled. In practice, governance is exercised through the activities of the company’s board of directors and its internal and external auditing mechanisms. The goal of corporate governance is to establish uniform management standards — particularly among public companies — to ensure that business operations are conducted transparently and ethically, to prevent financial crises at major corporations, and to protect the interests of all stakeholders.
By Igal Mor, Adv. & Notary
Accuracy in Legal Advice. Excellence in legal support.
Background: Corporate Governance in Israel
Over the past two decades, many countries have developed and refined corporate governance policies. This effort is rooted in the belief that administrative and accounting scandals — such as those that have shaken the financial world in recent decades — must be prevented to the greatest extent possible. Israel joined this global movement when the Securities Authority appointed a committee (headed by Prof. Zohar Goshen) to recommend a corporate governance code for public companies. The committee consulted with a wide range of professionals, including lawyers and accountants from public companies, before issuing its recommendations.
A key recommendation was to increase the independence of corporate boards of directors. This was implemented through Amendment 16 to the Companies Law, which, among other provisions, established minimum requirements for the number of independent directors on the board and prohibited officers subordinate to the CEO from serving as directors. The purpose of these changes is to strengthen the board’s ability to independently oversee company operations.
What Does Corporate Governance Mean in Practice?
As noted above, corporate governance encompasses a set of principles and rules designed to create an effective management and control framework for the company. In practice, this means that the board of directors actively supervises the company’s activities and ensures that proper financial and administrative controls are in place.
A strong corporate governance system serves a dual purpose. First, it provides a framework for protecting the stability of the business environment and preventing accounting and managerial scandals that, in the past, existing mechanisms struggled to detect. Second, it reduces the risk associated with investing in public companies for all stakeholders — both existing shareholders and potential investors. In addition, a robust governance policy enhances the company’s reputation, since corporate governance standards have become a central measure of proper corporate conduct. Conversely, poor governance is widely viewed as a significant risk to a company’s long-term success.
Legal Counsel for Corporate Governance
We invite you to schedule a legal consultation to ensure that your company’s articles of association, corporate structure, and governance practices comply with current Israeli law.
Mor & Co. Law Firm’s Commercial Law Department has extensive experience representing entrepreneurs, businesses, and corporations from Israel and abroad across a wide range of legal areas, including corporate governance, board advisory, and regulatory compliance. Contact us by phone at 02-595-3322, via WhatsApp at 050-441-1343, or through the online contact form below.