"The honor and respect of the director's position has long since been replaced by the responsibility and duty of care that the director has had by his very position. Not today's director as the director of yesteryear. The director of the 2000s cannot be a naïve person who does not know how to ask questions that occasionally sit together and drink tea at board meetings. Today's director bears professional responsibility according to the test of 'reasonable officer' (section 253 of the Law), and as such, he is required to possess 'the necessary skills and the ability to devote the appropriate time in order to perform the role of a director in the company' (section 224A of the Law)" (emphases added - 10) (Civil Appeal Authority 4024/14 Africa Israel Investments in Tax Appeal v. Cohen, para. 53 (April 26, 2015)).
The directors blindly trusted Pinkovich's actions as CEO, they did not understand the company's financial situation and the massive infusion of funds into the factory of the subsidiary (whose CEO was Pinkovich's son) disappeared from their eyes. The argument for the applicability of the "business judgment" rule in the present case is baseless, as in order to apply the rule, it must be shown that discretion was exercised in the rule. No minutes were presented from which it can be learned that the issue of the feasibility of investments in the subsidiary and the scope of the investments were discussed and "brought to the table". Rebes himself confirmed in his interrogation that the loss of ILS 17 million was intolerable, but he did not know about it. Sharon also claimed in his statement of defense that he was surprised by the scope of the alleged transfers (I will note that Rabas, Sharon and Pinkovich formed the "administration" that dealt with the village's affairs on an ongoing basis). This is an investment of approximately ILS 17 million in the subsidiary for the purpose of employing a number of dependents (it is claimed that during the peak period, the maximum number of dependents employed in the factory was only about 15 dependents). These investments were intended to endanger the village, and the parents cried out for this in their lawsuit. All the more so, given that according to the company's memorandum and articles of association, the company was not permitted to invest for profit or business activity, since the village was not established and was not intended to serve as a business company.