The News Behind The News
April 11, 2000
What follows are excerpts from an interview with Eli Barkat, general manager of BackWeb, a successful Istraeli Internet company.
Question: Danny Goldstein [of Formula, another Internet success] said Israeli legislation was unsuited to the high-tech world and regards entrepreneurs as 'potential thieves." Do you agree?
Answer: Certainly. The new Companies Law has provisions (the funniest or saddest thing about it) relating to directors. A general manager cannot be chairman. Every company must have one or two directors who receive neither salary nor options. But they are exposed to class actions in a volume of tens and hundreds of millions of dollars. Do you know anyone who might like a job like that. The law's stated objective is to prevent controlling shareholders from oppressing the public. But in practice, the result is that the companies become less competitive. Instead of learning from U.S. companies, we are regressing.
Question: What do you mean?
Answer: The law that (presumably) tried to protect the Israeli investor actually gives foreign companies a competitive edge. In the high-tech world were are competing against foreign companies that are not bound by the provisions of rigid Israeli law. We have been handcuffed and told to compete that way.
Question: What will happen if the law is not amended?
Answer: It will be a great pity. We are being advised to register a company in Delaware and set up a subsidiary in Israel to deal with research and development. Look at Mercury [another Israeli-created firm], which is an American company under law. Its general manager can give options freely, can merge without coming into confrontation with tax officials and outdated legal provisions.
Question: You sound really angry.
Answer: I certainly am. The situation is that Israeli companies are esteemed on account of their technology, but now the government is sticking it to us with this law.
Question: How do you explain the fact that the Israeli government is being so blind?
Answer: [Please pay careful attention to this answer] There is a concept prevailing with the government that Israeli high-tech is an empire. I remember that Barak, at a NASDAQ event [in February] praised Intel, which had acquired the Israeli company DSPC for $1.6 billion, nothing that this was a token of the strength of Israeli high-tech. But he forgot, or didn't know, that what was involved was actually two U.S. companies. DSPC, which is registered in the United States, had a development center in Israel, but the tremendous capital gains went to the U.S. public. DSPC is [erroneously] called an Israeli company because it has a development center in Israel.
Please note: Eli Barkat was much too kind to his prime minister. But maybe Barkat and Goldstein are harbingers of a wave of Internet entrepreneurs, who will resist the Israeli government's unending assault on private entrepreneurship.
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