Check Point nears its 20th anniversary. Gil Shwed reveals his management style, and how it has changed

Check Point co-founder, chairman and CEO Gil Shwed : “I work for the interest and the challenge”.

GIL SHWED

/ By Hagai Golan/

In a month’s time, Check Point Software Technologies Ltd. (Nasdaq: CHKP) will celebrate 20 years since it was founded. The network security giant, one of the most amazing companies to have grown up in Israel, is highly relevant to some of the burning issues of the day, and this is an opportunity to ask company founder, chairman and CEO Gil Shwed if he thought that Check Point would grow to such dimensions. “Yes and no, ” he says, “I thought that the Internet would be something huge. A revolution. I didn’t realize to what extent.”
What do you think of the exit culture that has taken root here. You are a company that symbolizes the opposite, a company that continually grows and develops itself. Does that mean that you’re against exits?

“I’m not for or against. I’m very, very happy, and this is what I wanted from the start, to set up a company here, a company that would be big, that would be around for years, that would be here, and I managed to fulfill that dream. I don’t think that every company can do that, for one simple reason, which is that, in the high-tech industry, there are too many technologies, too many companies, more than the market is capable of absorbing, and in the end the customer can’t buy a solution from 100 companies. He has to focus. So, many good ideas and good technologies and good people will have to become part of a larger solution. In that respect, I don’t think that Israel is very different from anywhere else.”
– What sort of manager are you compared with what you were like in the past?

“I’ve grown up a lot. I’m much more relaxed today. I think I’m more emotional now than 20 years ago when I was a kid. When I started Check Point I was 24, I didn’t allow my feelings to interfere, and every decision was analysed at a level of analysis and information much higher than today. Today, I have a little experience. Today, I can sometimes allow myself to say that because of what I feel about certain fields or certain people, I can make decisions. But in general I think that I have become a little more mature and a little more relaxed.”
You often mention the company’s employees, but in general you don’t believe in keeping people at the company through their salaries.

“I think that the employees are here because it’s good for them, because they are fulfilling themselves, because they are part of the vision, because it’s a home for them. Salary is part of that, but a small part. I do think that for many Check Point employees, certainly all the senior employees, there is a large incentive to stay at the company through shares and things that keep them for the long term, and in good times they make them a large part of the company’s success, much more than salary.”

 

And if someone at management level whom you value and whom you think should be kept at the enterprise says to you, ‘Listen, I’ve been offered much more money somewhere else’. Will you try to fight to keep him? Will you raise his salary?

“It doesn’t happen a great deal, certainly not in Israel. I think that in Israel we pay a very competitive salary, and all the professional and good employees receive a lot. It’s very rare that an employee comes along and says he is leaving because of salary. Quite a few people leave because of a career opportunity, because they feel they have given all they have, and sometimes it’s very regrettable. Outside of Israel, the culture of fighting over salary is more prevalent, and sometimes we compete and sometimes we don’t, depending on the circumstances. In any event, I wish to make clear that salaries at Check Point, both in Israel and around the world, are very competitive.”
You take the minimum wage from the company and receive almost all your compensation in the form of a generous quantity of options. Why is that?

“I want to demonstrate to myself and to our people that I don’t work for the money. It’s terribly easy to come to all my employees and say, you’ll get this or that, you’ll receive such a such a raise, or you won’t receive a raise, and take for myself, or let them give me, because I have never decided my salary. I have a management board and I have never conducted a conversation or negotiation with them about my salary. I have always accepted whatever they gave. And the truth is that I have usually returned some of what they gave me. I work for the interest and the challenge.”
You can sell the options at any time.

– “More than ten years ago the board decided to raise my salary to what it considered the right level. That year, the high-tech market was in crisis, and I didn’t raise the employees’ salaries by that percentage, and so I decided that it didn’t make sense that I should receive a raise and my employees not. I decided that I wouldn’t draw my salary, and since then quite a few years have gone by in which I haven’t drawn a salary.
“After a few years, they came and told me that I couldn’t not draw a salary, that it didn’t make sense. So I said that from that day I wanted it to be settled that I wouldn’t receive a salary at all. I didn’t mind continuing to receive the options, because I think that shows my faith in the future of the company and the future of the stock, and shows the shareholders that that’s my only interest, that I want Check Point to grow. Since then, they have very much reduced the quantity of options I receive. These options are worth a great deal of money, and I very much hope that they will continue to be, for my sake and for the sake of the 90% of other shareholders. But, there were years in which I had options that were not worth anything, that expired without me exercising them, ‘out of the money’. That also happened once.”
Check Point hardly pays taxes here in Israel. Does that seem right to you?

“That’s not correct. Check Point pays a great deal of tax in Israel. Very good rates of tax, hundreds of millions of shekels a year. No-one likes paying taxes, but I’m glad that it’s in Israel and not somewhere else.”
You are certainly aware that the issue of trapped profits has been on the public agenda recently, the huge amounts of money that companies prefer not to distribute. What’s your stance on this? 

“I think that the state tried successfully to create incentives for companies to be here. You have to remember that in the global world, a company like Check Point makes 99% of its sales outside Israel. Most of our employees are outside Israel. Where we pay taxes is something very flexible, and that’s true of any high-tech company. The State of Israel created very good incentives for companies to build themselves and grow here, and, strange as it may sound, to pay taxes here rather than elsewhere. These incentives have succeeded, but suddenly people jump up and say, ‘Oh no, it worked’.”
You don’t think something needs fixing?

“The answer to that is very simple it has already been fixed. Two years ago, all the ordinances and laws in this area were changed. There’s a new Law for the Encouragement of Capital Investment under which all the companies pay. A lower percentage in the periphery, a higher percentage in the center. So this question belongs to the past. As a result of this law, a company like Check Point pays twice as much tax in Israel, and you haven’t heard us complaining about it or lobbying against it.”
If these incentives didn’t exist, do you think that Check Point wouldn’t be here?

“There’s no doubt that Check Point would be here. The question is how much tax we would pay. I’ll give you a small example. Today, when we buy a company somewhere in the world, and we’ve bought several, we make every effort to bring its revenue and profits to Israel, among other things because I’m always happy to pay the taxes in Israel and not in some other country. In addition, the tax rate here is lower. So I make great efforts to change the location of the revenue and profits of the company I have bought so that the taxation will be in Israel. That brings Israel more tax. In recent years we have brought millions of shekels, maybe tens of millions of shekels, in new taxes to the state from companies we have bought overseas.”
One company trying to compete with you that has also made many headlines is Palo Alto, founded by one of the founders of Check Point.

“We’re talking about a past junior Check Point employee, a very talented and very problematic young man.”

 

We are of course talking about Nir Zuk, and it seems that feelings run high between you. Is the rivalry a matter of business only, or is it personal?

“There’s no business rivalry. I find it very unfortunate that Palo Alto, which has interesting technology and interesting ideas, chose to base its strategy on bellicosity and provocations against Check Point. I think that they learned a great deal from us, and that, in the end, what they do is in some cases a simple imitation of Check Point products. Apart from that, our market has always been competitive. We have been through four generations of competitors, and we’ll get through this as well.”
Nir Zuk was a junior employee at Check Point?

“He was a team leader. He managed 3-4 people.”
It seems that you take care not to mix emotions and business. Is this a matter of keeping a poker face, or is it genuine?

“I think it’s both. First of all, I’m very emotional about my work, about Check Point’s workers, and about the people I’m with. I think that the combination of rational management and strong feeling about what I do creates a very good balance.”
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