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Scotiabank taps Finning CEO to replace retiring Brian Porter in surprise move

Key Speakers At The Institute Of International Finance Annual Membership Meeting
Key Speakers At The Institute Of International Finance Annual Membership Meeting

Bank of Nova Scotia has made an unusual move in the staid world of Canadian banking behemoths, appointing a director rather than a member of the executive team to succeed Brian Porter as chief executive of Canada’s third-largest bank.

Porter, who helped navigate the bank through the financial crisis as chief risk officer and then overhauled its Latin America operations and leapt into digital innovation as CEO, is stepping down at the end of January after more than nine years in the top job.

In a rare transition, his replacement, Scott Thomson, has never served as part of Scotia’s executive team. He will get a crash course beginning Dec. 1 when he becomes president, with responsibility for several of the bank’s business lines: Canadian banking, global banking and markets, global wealth management and international banking.

At the moment, Thomson is chief executive of equipment dealer Finning International Inc., where he’ll remain until Nov. 15, and he has been a member of Scotia’s board since 2016.

Prior to leading Finning, the largest dealer of Caterpillar equipment and engines in the Americas and Europe, Thomson was chief financial officer of Talisman Energy Inc. Earlier in his career, he worked at Bell Canada Enterprises and Goldman Sachs.

To “support the transition” at Scotia, Porter will serve as strategic advisor from Feb. 1 to Apr. 30, 2023, the bank said in a statement Monday morning.

 Scott Thomson, left, and Brian J. Porter, right.
Scott Thomson, left, and Brian J. Porter, right.

John Aiken, a bank analyst at Barclays, said the transition is unexpected but is not likely to signal a sharp shift in strategy because Thomson helped forge the bank’s current path as a member of the board.

“The appointment of a Canadian bank CEO from outside of the organization/industry is surprising,” he told clients in a note Monday morning. “That said, with Mr. Thomson’s involvement in the board (and several committees), we do not expect the transition to be jarring.”

The analyst added that Thomson’s experience in Latin America, where Scotia has substantial operations, is “a positive and was likely a component that attracted the search committee.”

But other analysts saw the surprise appointment as a signal that a shakeup is on the horizon.

“We have to assume that change will be coming,” Paul Holden, a bank analyst at CIBC Capital Markets said in a note to clients. “Thomson was an agent for change when he joined Finning as CEO and we assume the same will be true when he becomes Scotia’s CEO.”

Holden said there will be some uncertainty in the near term because of the long transition and because “it is not obvious what changes will be made.”

Richard Leblanc, a professor of governance, law and ethics at York University, said it is unusual to combine director and CEO succession, and it is particularly rare in the Canadian banking world, where CEOs are usually selected from within executives ranks in a grooming period that can be years in the making.

“Normally a board goes outside when it wants a major change,” Leblanc said, adding that a search committee “also may go outside when the internal bench is weak.”

Analysts noted that there was significant executive turnover at Scotia during Porter’s tenure, with departures including Anatol von Hahn, former group head of Canadian banking, who left the bank in 2015, and Mike Durland, former group head and CEO of global banking and markets, who left the following year.

Porter’s departure from Scotia as he enters his tenth year in the top job was not seen as a surprise, given the length of his tenure.

 Pedestrians walking past the Bank of Nova Scotia building in the financial district of Toronto.
Pedestrians walking past the Bank of Nova Scotia building in the financial district of Toronto.

He joined Scotia in 1981, but it was during the financial crisis of 2008 that he rose to prominence there, having taken on the role of chief risk officer a few years earlier. Canadian banks including Scotia came through the crisis relatively unscathed, particularly compared to peers in the United States, U.K. and Europe.

Porter was promoted to group head of risk and treasury, and then international banking in moves industry watchers said at the time were preparation for him taking the helm. While CEO, he championed innovation and presided over the construction of a standalone Digital Factory in downtown Toronto for employees to experiment with banking apps and blockchain.

He also pulled the bank out of some of its international locales, selling operations in 2018 in nine nations in the Caribbean, where the bank had operated for more than a century. He pivoted to focus where the bank had more scale, with international growth centred around Mexico, Colombia, Chile and Peru.

Porter was also one of the more outspoken bank CEOs among the current crop, taking on issues such as Canada’s productivity gap relative to other nations and highlighting it as a threat to the country’s economic prosperity. In June, he wrote an open letter to Hockey Canada saying he was “appalled by the recent reports of alleged assault involving younger ambassadors of Canada’s game” and that Scotia would be pausing the bank’s sponsorship until “the right steps” were taken to improve the culture within the sport — both on and off the ice.

Aaron Regent, chair of the Scotia’s board, praised Porter as a forward-looking leader who had made “bold, strategic decisions that have repositioned the bank” while presiding over assets that grew to $1.3 trillion from $744 billion.

“He refocused the bank’s geographic and business priorities and redeployed capital into businesses with greater growth opportunities, while exiting non-core markets,” Regent said in a statement, noting that the global wealth management business has more than doubled in size and now ranks number two by assets in the Canadian retail mutual fund industry.

Regent called Thomson a “seasoned CEO” and said his skills include familiarity with the international market, talent development and digital transformation. He added that Thomson has a proven track record of effective capital allocation and strategic investments.

“He successfully led large organizations in challenging and complex macroeconomic environments, including providing tremendous leadership at Finning throughout the COVID-19 pandemic,” Regent said.

“As a board member of Scotiabank since 2016, Scott has a comprehensive understanding of the Bank’s strategy, operations, management team, risk appetite, culture, and drivers of growth.”

Regent said Thomson is committed to accelerating the bank’s customer focus, digital capabilities and ESG priorities as CEO.

In a statement, Thomson praised Porter for his “long-term vision and strategic investments in people, processes, technology and products,” which he said will continue to benefit the bank for many years.

“I am incredibly honoured and energized to be joining and leading the bank’s world-class leadership team,” Thomson said in the statement. “During my six years on Scotiabank’s board, I have had the opportunity to see first-hand the incredible potential of this organization, and the dedication and skill of its people.”

York’s Leblanc said Thomson will have insights into the bank’s operations from his years as a director, with an outsider’s perspective that could be helpful. But the transition could also present challenges because as CEO he will report to the board rather than approach them as a peer and fellow director.

“The transition may not be easy,” Leblanc said.

“I don’t see this becoming a trend because normally the lanes are very clear (between) board and management.”

But Beverly Behan, founder of New York-based Board Advisor LLC, who has consulted with boards of directors in the United States and Canada including Bank of Montreal, said such transitions are not unheard of in other sectors.

A well-known example was when Hewlett-Packard director Meg Whitman, former CEO of eBay, was installed as CEO of HP. During her tenure from 2011 to 2015, she oversaw the company’s split into two separate entities: Hewlett Packard Enterprise and HP Inc., which focused on personal computers and printers. She stayed on for another two years as CEO of the former.

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