Scott Thomson’s wife bought him four red ties for his 53rd birthday, just days before he formally stepped into the role of chief executive officer of Bank of Nova Scotia BNS-T in February. After six years on its board of directors, he was about to become an employee of Scotiabank for the first time.
Since he was announced as the new CEO in late 2022, Thomson had been wearing the only red tie he owned day in and day out. Scotiabank’s logo is red, and he needed more of the ties to match his new gig.
Moving from the bank’s board of directors to the top executive job doesn’t fit the typical path of a Big Bank CEO. Toronto’s financial district is a chessboard of towers topped with bank logos championed by lifelong bankers. Potential CEOs are meticulously trained and groomed, often for decades. When a new CEO takes over—even after an internal power struggle—they already have some name recognition among employees and with investors.
But Scotiabank stunned Bay Street last year when it passed on internal candidates and tapped a board member for the CEO role. While directors are well known to senior executives, the average employee doesn’t pay attention to, or directly feel, the machinations of board decisions. Most of Scotiabank’s tens of thousands of corporate, branch, digital, commercial and wealth management employees had probably never heard of Thomson.
Instead of chasing deals on the capital markets floor or overseeing thousands of frontline retail bank employees, he’d spent his career visiting mines as CEO of construction equipment dealer Finning International Inc. and, before that, working on the corporate side of telecommunications. But Scotiabank’s board bet that his outsider perspective and previous experience as a CEO would be the key ingredients the lender needs to turn around its disjointed operations.
Scotiabank was—and still is—in the throes of its own identity crisis. The bank’s share price has underperformed its peers over the past decade. Bank of Montreal has overtaken Scotiabank in market capitalization, so Scotia dropped from Canada’s third-largest bank to fourth. The threat of a recession and a stricter regulatory regime has weighed down bank stocks for almost a year. Inside Scotiabank, many employees have spent years walking on eggshells, feeling uncertain about the security of their jobs and whether their careers could develop at the bank.
Much of the anxiety is the legacy of Thomson’s predecessor, Brian Porter, who stepped down as CEO in January after four decades at Scotiabank. He cultivated an image as somewhat of a tough guy—inside and outside the bank. Porter ushered in a new workplace culture, seeking to shift the bank from the familial environment fostered under his predecessor, Rick Waugh, filled with lifelong staffers who’d grown comfortable there, to one that encouraged performance and a stronger desire to compete.
Porter wanted to bolster the bank’s focus on customer satisfaction and to measure itself more closely against rivals. But some employees and executives thought he took his vision too far, instead cultivating an uneasy environment where employees felt on edge, and many were either shown the door or left out of hopelessness.
After nearly a decade of this dynamic, Thomson wants to ease the pressures and win over allies both inside Scotiabank and externally. Before the end of the year, he plans to launch a turnaround strategy aimed at igniting Scotiabank’s beleaguered share price by growing its deposit base in Canada, and by refocusing its traditionally extensive operations in Latin America. But a major part of the plan hinges on Thomson’s ability to encourage Scotiabank’s more than 90,000 employees across dozens of different businesses to march to the beat of the same drum.
“The challenge is that it takes time and a different approach. It hasn’t been the way this bank has operated,” Thomson says in an interview in his Toronto office in mid-September. “It’s something that as a team, we are spending a lot of horsepower on now.”
Eight months into his tenure, on a sunny morning in September, Thomson—wearing a red tie speckled with white flecks—walks into a Scotiabank branch in downtown Toronto. Since he took on the job, he has sporadically popped into branches across the country, to the surprise of frontline staffers.
To help launch his new strategy, Thomson has been getting to know the people who run its businesses and who face Scotiabank customers every day.
At the branch, he asks employees about the types of personal banking customers they deal with, whether they also have relationships with the bank’s wealth management and small business banking units, and what tools and training the employees need to cross-sell more products and services.
The bank has to build up its deposit base—an important source of funding for bank loans—and it needs each of its businesses working together to make that happen. “The biggest opportunity is an enterprise-wide approach as opposed to a silo-based approach,” Thomson says. “The opportunity is starting with my team and making sure everyone around the table is thinking about the enterprise as much as their individual functions or business line.”
The immediate hill Thomson has to climb is to strike the right shift in tone on the bank’s culture. Porter had worked at Scotiabank for more than three decades when he landed the top job. During his nine-year tenure as CEO, he built the bank’s wealth management unit, streamlined its international businesses (traditionally the most international of Canada’s banks, Scotia has extensive operations in the Caribbean and Latin America) and invested in technology.
But the moves to boost growth failed to capture investors. Scotiabank’s share price slumped about 20% over the past five years—the worst performance among the Big Five banks. During Porter’s tenure as CEO, many executives parted ways with the bank, whether because they were nudged out or left of their own accord.
When it came time for the board to select Porter’s successor, it eventually deemed the internal candidates not yet ready for the promotion. Meanwhile, Thomson, who was chair of the board’s human capital and compensation committee, was recused from board and committee meetings when he decided to try for the CEO job himself.
He was an unlikely contender at first, but his corporate experience is extensive. Thomson worked outside the banking industry for two decades, traversing some of Canada’s largest industries. Earlier in his career, he was an investment banker at Goldman Sachs. He left the banking sector to join BCE Inc. in 2003 before becoming the chief financial officer of Talisman Energy Inc. A decade later, Thomson became the CEO of Finning, a role he held for nine years.
Finning is the largest dealer of Caterpillar equipment in Latin America and in the copper-mining industry in Chile, which means Thomson brought significant experience overseeing operations in some of Scotiabank’s most important markets.
When Thomson interviewed for the chief exec job at Finning, he didn’t have the resumé the company was looking for at the time, either. He was just 43, and he’d spent years overseeing balance sheets and income statements at Talisman. Finning’s board was searching for a seasoned executive in their 50s with experience leading a company’s operations, according to Doug Whitehead, former CEO and now chair of Finning.
“But boy, when we met with him, when we saw his leadership capabilities, when we saw his interpersonal skills, it was outstanding,” Whitehead says. “He was smart enough to realize that there were some issues at Finning. He was able to read all the financial statements, put together a pretty compelling strategic plan even before he joined the company.”
Ten years later, it’s a bit of déjà vu all over again. Thomson finds himself plotting another turnaround plan, this time for one of Canada’s largest banks.
On a long shelf above the desk in Thomson’s office, business books punctuate the gallery of framed artwork that his children drew for him.
“My kids saw my office for the first time about three months ago, and they were very intently looking at all the art and counting who had the most art. I learned my lesson from that. So, I made sure that I have both of them,” he says, pointing to two paintings of Pikachu, a popular character from the anime Pokémon, each signed by his two children.
Next to the paintings sit a row of books, including one on the history of Scotiabank and the other on leading a company through periods of uncertainty. But the book that he reaches for most often sits on his desk closer to his computer. It’s titled The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation, and Growth. “The one that is relevant for what we’re doing is this one,” Thomson says, picking up the book. “The point here is psychological safety and how you create a culture where people feel like they could bring their best to work.”
“In this organization, we have not had the cadence or the structure to necessarily encourage all perspectives to come to the fore,” he continues. “If you can do that—which I think we’ve been doing quite well in the last nine months—ultimately, you’ll get to a better answer. And people will feel good about work every day and bring their best selves, and therefore you become an employer people want to work for.”
The book helped provide context for the turnaround plan Thomson has been trying to implement. “You can’t set the path for going forward until you recognize the areas for improvement,” he says. “You have to create the platform for change, and we spent a lot of time as a team highlighting why. There were a lot of different perspectives, and you had to get through the anecdotes and the perceptions and get down to data to understand the reasons for the underperformance. Once you do that, you have to come together as a team to paint the North Star, and that’s what the last nine months have been about.”
First, Thomson had to sit down with the group heads—global banking and markets division head Jake Lawrence, Canadian banking head Dan Rees and international head Nacho Deschamps—who had been considered internal frontrunners for the CEO job. The big question on Bay Street was whether they would choose to stay.
“I look at the opportunity working with Scott and the rest of the leadership team, and I think we find ourselves in a fantastic spot to really drive change and better returns in the coming years,” Lawrence says. “That’s a great business opportunity for me personally.”
As an extra incentive to stick around, Rees and Lawrence both received one-time stock awards valued at $1.5 million apiece due to the “importance of maintaining the overall strength of the leadership bench, and the future potential” of the executives, the bank said in a proxy circular in March.
Thomson puts a premium on the expertise of his leadership bench. Beyond the daily financial labyrinth he’s navigating with the strategic refresh, encouraging his team to share ideas and feedback is at the forefront of his decision-making process.
To bring Scotiabank’s disparate teams together, Thomson hosted “challenge” sessions with senior leaders at the bank—the people who run the various segments across its business lines. During the meetings, executives made presentations about their units and the issues they’re navigating. EVPs from other segments of the bank asked questions, and provided feedback and analysis of their plans.
The point of these meetings is to encourage leaders from across the bank to think critically about how their divisions are connected to the others, and encourage them to speak openly about the concerns they face. “When our leadership team sits down now, people recognize what we’re working on and the importance of it and how important it is to be engaged,” Lawrence says. “I feel very comfortable offering feedback on different parts of the bank, and I feel very comfortable receiving feedback from different parts of the bank.”
Thomson has also ushered in a broader leadership shakeup as he builds Scotiabank’s executive pipeline. He tapped four seasoned external candidates to join him at the senior leadership table. In April, Deschamps retired after seven years—he also gifted Thomson a red tie—as the lender brought in a new hire, Francisco Aristeguieta, formerly executive vice-president and CEO of Boston-based bank State Street Corp.’s institutional services unit.
Jacqui Allard left her post as Royal Bank of Canada’s executive VP of personal financing products and joined Scotiabank in September as deputy head of global wealth management. She’ll succeed Glen Gowland as group head of global wealth management on Jan. 1, when he transitions to an advisory role as vice-chair.
Aris Bogdaneris, formerly the head of retail banking at Amsterdam-based ING Group, took on a newly created role as group head of digital transformation, Tangerine (a Scotiabank subsidiary), and marketing and analytics. Jenny Poulos, formerly an executive at RBC, joined the lender in early October as deputy chief human resources officer and will be promoted to chief on Dec. 4. She replaces group head and chief HR officer Barb Mason, who is retiring after more than 40 years with Scotiabank.
Thomson also promoted chief risk officer Phil Thomas, who has been with the bank for 26 years and in his current role for two, to the role of group head and chief risk officer. And he expanded and shifted the roles of four executive VPs.
“I need people around me who have deep expertise in banking. There are a lot of benefits that come with an outside-in perspective, but we also need to recognize that these are complex organizations and banking expertise is important,” Thomson says. He is “making sure we maximize the internal talent in the organization—and we have great internal talent that can be developed, along with progress in the organization—but we also needed outside perspectives. Bringing people in like Francisco, Aris, Jenny and Jacqui, who have seen the world from a different perspective and have very deep expertise, that will be a powerful combination of great internal capabilities and very deep external experience.”
September is conference season in banking. The top executives of Canada’s largest lenders zip across Canada and over the border to the United States to speak to auditoriums full of investors and meet with their shareholders for face-to-face discussions. Scotiabank hosts one of those conferences every year. A Scotia session in September was Thomson’s first time kicking off a round of fireside chats with bank CEOs.
As investors asked the new CEO questions, two major themes emerged. They wanted to hear about how the bank assesses its stability and liquidity—a concern that has stretched across the sector since the collapse of Silicon Valley Bank in March—and how Scotiabank plans to reallocate resources among its businesses as it rejigs its operations.
Since Thomson’s first month as CEO, he has signalled to investors that significant strategic changes are coming. He has since launched a company-wide “refresh” to address investor concerns that stem from years of paltry returns. Thomson has said repeatedly that Scotiabank’s share-price underperformance relative to its rivals has been unacceptable.
“Scott is speaking truth when he says that the bank’s performance hasn’t been what it needs to be,” says Rob Prichard, current chair of Torys LLP and former chair of BMO. He worked with Thomson while they were both on the board of the Weston family’s holding company. “He was a member of the [Scotiabank] board of directors himself, so it’s not like he’s saying it’s the other guys that messed it up. He’s acknowledging a hard truth, and he wants to organize a team so that they’ll perform better going forward... And Scott has all the personal talents, character, determination and ambition to do it successfully.”
As part of the new strategy, Scotiabank is focusing on growing the lender’s Canadian deposit base and on rejigging its operations in Latin America.
The first is a tall order. Canada’s domestic banking industry is highly saturated, dominated by five behemoth banks. Making inroads in the highly competitive market requires drawing customers from rivals—a game of tug of war that all the lenders play in perpetuity. Scotiabank has leaned heavily on lending out money. The bank’s relationship with its customers typically hinges on a mortgage or other loan. This is immensely valuable for Scotiabank, because banks make a lot of money from loans, but that strategy alone won’t bolster its ambitions for growth.
Simply put, Scotiabank needs its customers with credit products to bring over their cash. This is a major reason that explains why Thomson needs his leadership team and their separate businesses to talk to each other more often. Customer relationships are complex and often include many layers. A client who invests savings with Scotiabank’s wealth management unit could also be a business owner and a homeowner with commercial deposits and a mortgage at a rival bank.
This strategy in banking isn’t new. Many Canadian banks have already employed it in recent years. But at Scotiabank, the key to making it work is improving its employee culture.
Banks also need deposits to fund loans, and there are no deposits “stickier”—or the least likely to be pulled out in times of economic stress—than those from personal and commercial banking customers. Thomson plans to grow Scotiabank’s operations in British Colombia and Quebec, markets where he believes the bank is underrepresented. That could require reallocating resources from its international businesses to its operations on its home turf.
Thomson has also signalled that the returns the bank has garnered in Latin America haven’t been worth the level of risk. A new strategy will cast a spotlight on Mexico to make inroads in the Latin American trading bloc known as the Pacific Alliance—which also includes Peru, Colombia and Chile. Scotiabank is a top-five lender in Mexico, and Thomson plans to compete by targeting industries that benefit from Mexico’s export agreements—largely with the U.S.—by growing the bank’s commercial, wholesale and wealth management businesses in the country. “We have to recognize that we’ve deployed a lot of capital into the Pacific Alliance countries, and we haven’t seen the returns commensurate with the risk in those environments,” Thomson says. “And we have opportunities for growth in our home market, in the U.S. and Mexico. A moderation of the capital deployed at some of these emerging markets, and an acceleration of that capital to some of the markets where we have opportunities for growth at higher risk-adjusted returns, is going to be essential.”
These remarks have prompted investors and analysts to wonder if Scotiabank will divest from certain regions. The lender’s business in Colombia has underperformed operations in other countries. Scotiabank’s return on equity—a key industry metric that measures profitability—was negative 2% in Columbia in the second quarter, far below the other Pacific Alliance countries, with Mexico posting 21%, Peru at 19% and Chile at 10%.
Latin America has always been a challenging banking region. The countries’ markets are vastly different, and their economies are difficult to predict. Each market faces its own political barriers, causing uncertainty for businesses and customers. Further complicating matters, the banking culture in Latin America diverges from Canada’s: People tend to distrust lenders and carry less loyalty to their local banks. And loan delinquency rates tend to be higher, especially as interest rates have spiked faster and further than in Scotiabank’s home market.
With 30,000 employees across the region, the task of cultivating a consistent workplace culture is also a challenge. Before Aristeguieta joined Scotiabank as the head of international banking, he spent more than three decades working in markets that include Latin America, North America, Asia, Europe and the Middle East.
“I’ve learned through the years living everywhere around the world that culture is everything, and you need to be very respectful of culture and the role it plays in success,” Aristeguieta says. “I’m very impressed with [Scott’s] ability to manage a group of people that have come from a journey with another leader with a very different style and very different approach, and how he’s been able to transform the engagement, participation, inclusion and way we interact with each other. It’s yielding much better outcomes in terms of the quality of the decisions we’re making and bringing everybody together in a way that I understand was harder in the past.”
Back at the branch in Toronto, Thomson walks down the row of financial advisers’ offices. Many of the employees proudly proclaim that they’ve just been “elevated.” The program allows branch employees to study and train to achieve special certificates that, once obtained, give them automatic promotion to senior ranks within the branch’s sales force.
It also incentivizes employees to grow within their branch, rather than leaving for another—and taking the institutional knowledge of their clients with them.
“Ultimately, people want to be respected, and they want to be developed,” Thomson says, walking past skyscrapers from the branch to his office. “If you can show them a path, that doesn’t mean they’re going to be with you forever, but how important is continuity to the client? Having that relationship and people who know the client is so important.”
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