September Edition 2022

54 boards of directors are inclined toperpetuate their effective control by picking "more of the same" candidate directors who are more likely to preserve the company's current conduct. On the other hand, external candidates proposed by institutional directors may contribute to more diversity and more pluralism in the Board. We thus propose that such institutional directors should be allowed, and even encouraged, to do so, and that, to the extent necessary, cooperation among such institutional investors, in this regard only, should not be deemed as infringing any applicable antitrust/competition laws. It is further proposed that, in doing so, such institutional investors should not be considered as "holding together" the shares of the company in question, for the purpose of definition of "Control" under the Companies Law. We should also note that while the Bill pays lip service to diversity (by providing that, where all Independent Directors are of the same gender, the newly appointed Independent Director should be from the other gender), ESG compliance (or at least the "ES" part) is yet to be more properly, addressed by Israeli laws. In closing, we should note that, given the rather volatile political situation in Israel (with five elections being held between April 2019 and November 2022) it will be presumptuous to estimate when (and if) the Bill will be passed (and in any case, as per the Bill, its provisions shall become effective on the first anniversary of the enactment of the amendment to the Companies Law based on the bill. Therefore, it is safe to assume that the Bill will not become effective before 2024.

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